Ethereum Drops 54% Amid Market Uncertainty, ETF Outflows
2min read Ethereum (ETH) has faced significant bearish sentiment over the past four months, with its price dropping by more than 54% since December 2024. This downturn has been exacerbated by heightened market uncertainty and leadership changes within the Ethereum Foundation. The U.S. spot Ether ETFs have recorded a net cash outflow of nearly $200 million in the past three weeks, with even prominent funds like BlackRock’s ETHA experiencing outflows of $11 million on a single day.
On-chain data reveals that the overall supply of Ether on centralized exchanges has increased by about 81,397 ETH units in the past 24 hours, reaching approximately 15.01 million coins. This influx of Ether onto exchanges suggests that investors are liquidating their holdings, which could further pressure the price of ETH. Additionally, the Bitcoin miner reserves have been declining, currently hovering around 1.92 million, indicating a shift in investor sentiment towards other assets.
Recent events on the Hyperliquid trading platform highlight the risks associated with high leverage trading. An Ether whale opened a long position of 175,179 ETH with 50x leverage, worth about $335.6 million. The whale later closed 14,945 ETH positions, worth about $28.7 million, leaving 160,234 ETH to be liquidated. This liquidation resulted in a profit of $1.86 million for the whale but caused the Hyperliquidity Provider (HLP) to lose $4 million in the past 24 hours. In response, Hyperliquid announced a reduction in leverage for Bitcoin and Ether from 50x to 40x and 25x, respectively, to mitigate the risk of liquidity drain.
Despite being the leader in the decentralized finance (DeFi) sector with over $45 billion in total value locked (TVL) and a stablecoins market cap of over $122 billion, Ethereum's price has been retesting its lowest levels since May 2020. The price has closed below a crucial support level of around $2.1k, facing further selloff towards $1.5k unless a V-shaped reversal occurs. The current price of Ethereum stands at $1,940, with support near $1,750. If Ethereum holds this support level and reclaims the $2,200 mark, it could potentially test the $2,850 key resistance. However, a daily candlestick close below $1,500 could invalidate this thesis and send ETH toward the $1,000 psychological level.
The Relative Strength Index (RSI) and Stochastic Oscillator (Stoch) have retreated from their oversold regions, indicating a decline in bearish pressure. This could suggest a potential recovery for Ethereum. The latest filings from US spot Ethereum ETF issuers to include staking in their products follow recent administrative changes at the SEC, including the resignation of the agency's former Chair. The new SEC administration under acting Chair may lean towards pro-crypto regulations, which could potentially benefit Ethereum. Staking involves earning passive income by using crypto assets to contribute to a blockchain's security, and it could be a significant factor in Ethereum's recovery.
Ask Aime: What factors drove the 54% drop in Ethereum's price over the past four months, and how might the recent changes in the Ethereum Foundation and market behavior affect its future trajectory?
However, the Ethereum network has also experienced significant cash outflows in recent weeks, adding to the challenges faced by the asset. Continued outflows from Ether ETFs have limited Ethereum's price recovery. On-chain data supports the case for a recovery, with Ethereum outflows from exchanges recently hitting their highest levels in years. However, without strong momentum, Ethereum could remain trapped in its downward cycle. The double bottom that has appeared on higher time frames may signal a recovery, but it remains to be seen whether Ethereum can break out of its current bearish trend.
