Ethereum is currently trading at $3,063, losing 3% of its value over the past 24 hours. The price of Ethereum (ETH) peaked at $3,443 on Tuesday and has since seen a correction.
With bullish sentiment waning, the price of Ethereum faces the risk of a potential drop towards the $2900 price level. This analysis explains why this scenario occurs in the short term.
The decline in the price of Ethereum over the past few days has been accompanied by a similar drop in trading volume. Over the past 24 hours, its total trading volume has reached $35 billion, down 25%.
A low price indicates a weak demand for the asset as the number of sellers outnumber the number of buyers. The simultaneous decline in Ethereum’s price and volume indicates a weakening momentum, which could signal the end of its uptrend.
Traders often interpret this trend as a lack of persuasion among market participants, which further discourages activity and leads to a self-reinforcing cycle of price and volume decline.
Moreover, open interest for Ethereum fell to a seven-day low on Thursday, confirming the decline in market activity. According to Sentiment data, open interest in currency, which measures the total number of existing contracts in the derivatives market, now stands at $8.26 billion. It has fallen 12% since Monday.
When open interest decreases, existing contracts are closed instead of new ones being opened. During periods of high prices, low open interest means that traders secure profits or limit losses by closing their positions.
Ethereum is trading at $3,063, hovering above the critical support level at $2,942. If market activity remains weak, the altcoin may test this support. Bulls’ failure to defend this level could lead to a deeper drop towards $2,787.
Large outflows from Bitcoin and Ethereum cryptocurrency funds
The recent outflows from US cryptocurrency ETFs Bitcoin and Ethereum represent a major shift in the cryptocurrency investment landscape. This decline occurred on November 14, with consolidated net outflows of $400.7 million, marking the first event of its kind since Donald Trump’s election victory in 2016. Outflows come with Bitcoin (BTC) down 2% to nearly $88,200, as Ethereum has faced (ETH) headwinds, trading below $3,100.
In the run-up to outflows, Bitcoin showed exceptional resilience, rising from around $68,000 on November 5 to a peak of nearly $93,500 just a few days later. This impressive rise can be attributed to a combination of favorable market sentiment and increased institutional interest caused by significant policy changes.
Broader Impact of ETF Performance
The performance of these ETFs not only reflects the volatility of individual assets, but also highlights investors’ reactions to external factors, including economic policies and global market trends. ETFs are often seen as a measure of market health, and large shifts in sentiment can raise questions about future price trajectories.
Comparison of ETF flows for Bitcoin and Ethereum
While Bitcoin ETFs recorded notable outflows, Ethereum ETFs were not exempt from this trend; on the same day, ETFs on the US Ethereum Exchange saw outflows of $3.2 million. These simultaneous declines point to a broader slowdown in investor enthusiasm. The decline marks the first outflow of Ethereum ETFs since early November, which previously enjoyed significant inflows of around $800 million. This sharp divergence raises questions about the future trajectory of both cryptocurrencies and their associated trusts.
Low trading activity raises concern about Ethereum
The reaction in the price of Ethereum can be directly linked to the recent decline in trading activity. In the past twenty-four hours, trading volume has dropped to nearly $35 billion, a noticeable decrease of 25%. This decline in transactional activity often indicates a lack of confidence among traders, which in turn may lead to the continuation of the downtrend.
The simultaneous decline in price and volume adds to concerns about the sustainability of Ethereum’s bullish momentum. Sellers currently outnumber buyers, leading to fears that the situation may worsen. A prolonged decline could jeopardize current price support levels and push Ethereum lower.
In addition, low trading volume reflects hesitation among traders, which can lead to a self-reinforcing cycle of lower prices and volumes. This environment often leads to increased caution in market activity and may require a market correction before returning to more favorable trading conditions.
Furthermore, data from Santiment indicates that Ethereum’s open stake fell to an all-time low of the week at around $8.26 billion, a 12% drop since the previous reporting period. This decline often indicates that traders choose to close positions rather than take new risks during periods of volatility, highlighting cautious sentiment.
Institutional Cryptocurrency Investment Trends
Institutional engagement in the cryptocurrency markets has been the driving force behind previous flows to ETFs. However, as outflows increase, this could reflect a crucial revaluation moment among large investors. Fidelity’s ETF saw the largest outflow, at $179.2 million, followed by ARK Mutual ETF and 21Shares.Closely. Such large withdrawals by institutional players may indicate a potential shift in strategy, which could affect individual investors and market dynamics in the broader cryptocurrency ecosystem.
