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Ether Products See Largest Withdrawals Since 2022

Ethereum’s investment products are experiencing significant outflows, with professional investors pulling over $120 million from ether (ETH)-tracked exchange-traded products (ETPs) in the past two weeks, according to a recent CoinShares report. These withdrawals are the highest since August 2022, with $60 million in net outflows each week. In contrast, multi-asset and bitcoin (BTC) ETPs saw inflows of $18 million and $10 million, respectively, suggesting a shift in investor sentiment.



Ether ETFs on the Horizon

The U.S. Securities and Exchange Commission (SEC) recently approved applications for Ether ETFs, which are expected to start trading soon. Firms like Galaxy and Bitwise predict substantial interest, with potential inflows of $5 billion in the first five months and $15 billion in the first 18 months, respectively. The demand is anticipated to come from independent investment advisers and broker/dealer platforms.

Security Concerns and Losses

Ethereum’s blockchain has been the hardest hit by security issues in the first half of 2024. A report by blockchain security firm SlowMist revealed that Ethereum suffered approximately $400 million in security-related losses, making it the most affected chain. In comparison, Arbitrum and the Blast network lost $72 million and $70 million, respectively. Binance Smart Chain (BSC) recorded the highest number of incidents with 57, compared to Ethereum’s 46.

One notable incident involved the Ethereum-based gaming platform PlayDapp, which lost $293 million over two days due to a private key exploit. Despite efforts to negotiate with the hacker, including offering a $1 million bounty, the losses continued with unauthorized minting and distribution of $PLA tokens.

Looking Forward

These security challenges come at a pivotal time for Ethereum as the community eagerly awaits the full approval of spot ETH ETFs by the SEC. Industry experts expect the approval after the holiday season, despite delays from the regulator. The SEC has yet to definitively classify Ether as a commodity or security, adding to the uncertainty.

Ethereum’s journey has been more turbulent compared to Bitcoin, which reached an all-time high of $73,000 in March. Ether, meanwhile, has been trading above $3,000. Optimism remains high as the SEC’s partial approval of ETH ETFs and the end of an investigation into the blockchain could herald a new era for Ethereum.

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