Ethereum's sharp drop is the "culprit"? Founder Vitalik Buterin continues to sell and is questioned

Ethereum co-founder Vitalik Buterin moved about $10 million worth of ether to wallets associated with cryptocurrency exchanges in August, according to data tracked by Lookonchain.

In addition, data from Arkham Intelligence shows that about 422,000 ETH (worth $1.04 billion as of September 1, 2024) has flowed out of Buterin's Ethereum address since 2015. In the past two years, more than 840,000 ETH has flowed out of this address.

The transfers have fueled speculation that Buterin has been selling his holdings to realize profits in ether, especially as the cryptocurrency is trading 180% higher than its 2022 cycle low of $885.

Nonetheless, Buterin has denied the allegations.

I have never sold ETH for a profit since 2018 - Vitalik On August 31, Buterin clarified that he has never sold his Ether holdings for a profit, noting that all of his ETH transfers since 2018 have been to support various projects he deems worthy, either within the "Ethereum ecosystem or broader charities."

Interestingly, the August transfer occurred at the same time as 84,000 ETH worth more than $207 million was transferred from the official Ethereum Foundation address to cryptocurrency exchanges.

The culprit for the decline?

The Ethereum Foundation periodically sells a portion of its ETH holdings to fund development, research, and other initiatives critical to the ecosystem.

However, large Ether transfers can sometimes cause short-term market reactions as investors may interpret them as impending selling pressure.

For example, in November 2021, the Ethereum Foundation transferred 20,000 ETH (worth approximately $95 million) to Kraken.

These transfers occurred before Ether’s price peaked and subsequently corrected 85%, suggesting that the Ethereum Foundation’s sale of its Ether holdings — regardless of its intentions — caused the ETH market to fall.

Similarly, in May 2021, the Ethereum Foundation sold 350,000 ETH after the market price of Ether fell by 50%.

However, not all of the Ethereum Foundation’s sales occurred before major market corrections.

For example, around December 2020, it sold a huge amount of ETH at a time when Ethereum recorded a 630% price increase. Other factors that contributed to the surge in Ethereum prices included the launch of the Beacon Chain, which marked Ethereum’s shift to proof-of-stake, and the U.S. Federal Reserve’s loose monetary policy, which stimulated demand for risky assets, including cryptocurrencies.

Interestingly, the recent ether sales by Vitalik Buterin and the Ethereum Foundation come at a time when the Federal Reserve is planning to cut interest rates and outflows from spot Ethereum exchange-traded funds (ETFs) are slowing.

The foundation is out of money.

According to the latest report from the Ethereum Foundation, the Ethereum Foundation allocated $30 million in the fourth quarter of 2023. In the third quarter of 2023, the Ethereum Foundation allocated $8.9 million.

It has to be said that although Polkadot has faced controversy due to its crazy spending (related reading: Polkadot’s first-half financial report sparked controversy: $87 million in spending accounted for nearly half of its promotional expenses, and revenue was only $1.1 million), at least its reports are transparent and can be checked.

In addition, if the Ethereum Foundation continues to spend $100 million per year, it will run out of ETH in 8 years. If it wants to provide longer-term funding for operations, it must either increase the price of ETH or start staking to earn income.