Ethereum (ETH) has faced an accelerated correction this year, dropping by 41% since January. Yet its long-term holders are opting to HODL rather than sell. While low selling pressure is typically a bullish sign, there seems to be more than meets the eye.
Ethereum’s price struggled to close above $2,000 throughout the week, hinting at a potential bearish phase.
Interestingly, this comes as exchange balances decline sharply. While this indicates confidence in ETH, several key indicators suggest that a major rally may not be close
Ethereum Exchange Supply Near Historic Low
According to data from Santiment, Ethereum’s supply on exchanges has dropped to its lowest in nearly 10 years. In May 2020, the amount of ETH in exchanges was nearly 23 million.
By May 2021, it had fallen below the 18 million mark. Within that one year, ETH’s price rallied from $215 and peaked close to $4,000.
Today, the cryptocurrency’s exchange supply has declined to 8.97 million — the lowest since November 2015. This decline indicates that Ethereum holders are unwilling to sell their assets for peanuts.
Instead, they seem determined to hold on to it till the price potentially goes parabolic again. Historically, this should be the case within some months or a year thereabout.
Regarding this development, Santiment mentioned the decline in ETH’s exchange supply may be driven by increased movement into staking and DeFi platforms. This has likely made ETH scarce on exchanges, reducing immediate selling pressure.
“Thanks to the many DeFi and staking options, Ethereum’s holders have now brought the available supply on exchanges down to 8.97M, the lowest amount in nearly 10 years,” The on-chain analytic platform stated .
However, this cycle appears different, as several key metrics suggest a higher probability of an extended correction than a short-term decline.
Short-Term Holders Unconvinced
For instance, let’s examine the Coinbase Premium Index, which shows the level of buying and selling pressure in the U.S. When the index rises, it means that market participants are buying, which could put upward pressure on the price.
On the other hand, a decline in the metric indicates selling pressure, which is bearish. Based on data from CryptoQuant, ETH’s Coinbase Premium Index has declined to -0.056, indicating that short-term holders in the U.S. have refrained from adding to a potential bullish outlook.
Therefore, as long as short-term liquidation matches long-term HODLing, ETH’s price might find it challenging to jump. If sustained, then another Ethereum bull run might be off the cards unless something changes.
ETH Price Faces Resistance Ahead
Beyond this, the Global In/Out of Money (GIOM) shows that Ethereum’s price will likely encounter resistance above the $2,000 mark.
The GIOM groups all addresses into clusters based on the previously bought volume at specific price ranges. Larger clusters indicate stronger support or resistance at those levels, as more holders are vested in defending or exiting their positions.
Want to add ETHEREUM ETH to your portfolio? Discover the leading platforms for buying and selling ETHEREUM ETH on our exchange review page.
Typically, a higher volume in unrealized losses (red) indicates resistance. Meanwhile, many coins in profits (green) indicate support.
According to IntoTheBlock, ETH could encounter a supply wall near $2,407. At this price range, 12.36 million Ethereum holders accumulated over 65 million ETH and are in unrealized losses.
Thus, if the price eventually surpasses the $2,000 psychological support, it could hit a brick wall as some Ethereum holders might break even. Should that be the case, the altcoin’s value might struggle to breach the $2,400 region toward higher values.
Instead, it could face another pullback that might drive the value below $2,000 again.
Beyond these factors, the consistent outflows from Ethereum exchange-traded funds (ETFs) could also contribute to ETH’s struggles.
From a technical perspective, CCN examined the ETH/BTC pair as it historically also tells whether the cryptocurrency’s price might jump or not.
ETH/BTC Continues to Drop
On the weekly chart, the ETH/BTC ratio is 0.024, the lowest it has reached since May 2020. This decline indicates relative weakness in ETH’s price.
A look at the Moving Average Convergence Divergence (MACD) also shows that the reading has turned negative, which indicates bearish momentum.
As such, if the trend remains the same, the ETH/BTC pair risks falling to $0.016 based on the sign from the Fibonacci level. If that happens, Ethereum’s price might also crash further, and a decline toward $1,500 might be an option.
At the same time, it is important to note that things can quickly change in the crypto market. For instance, this prediction might change if Ethereum holders keep to their sentiment and the cryptocurrency experiences rising buying pressure.
If that happens, ETH’s price might attempt to replicate its performance between May 2020 and 2021. If validated, this might drive the value to a new high.
But as it stands, the altcoin continues to battle with bearish forces, which could suppress its value.
Disclaimer:
The information provided in this article is for informational purposes only. It is not intended to be, nor should it be construed as, financial advice. We do not make any warranties regarding the completeness, reliability, or accuracy of this information. All investments involve risk, and past performance does not guarantee future results. We recommend consulting a financial advisor before making any investment decisions.
Was this Article helpful?
