Ethereum's 5% drop could prove a slingshot effect after misinterpreted $2 billion ETH transfer sparks FUD
- Ethereum ETF investors continue their buying pressure with net inflows of $98.4 million.
- There's no $2 billion worth of ETH supply waiting to flood the market, claims EmberCN.
- Ethereum's recent drawdown could be a slingshot effect to new highs.
Ethereum (ETH) is down more than 5% on Wednesday after a potentially wrongly interpreted on-chain activity sparked fears of a $2 billion ETH supply flooding the market. While the outlook is bearish, ETF investors could force an ETH rally amid potential bullish divergence signs in technical indicators.
Daily digest market movers: ETH ETF investors show no slowdown despite wider market bearish sentiment
Ethereum ETF saw a net inflow of $98.4 million on Tuesday. BlackRock's ETHA and Fidelity's FETH had inflows of $109.9 million and $22.5 million, respectively. Grayscale Ethereum Trust (ETHE) recorded outflows of $39.7 million — its lowest outflow since ETH ETFs' launch.
The total net asset value across Ethereum ETFs on Tuesday is $7.06 billion. The inflows in ETHA put it among the top six ETFs launched in 2024, only being topped by five Bitcoin ETFs.
With ETHE outflows slowing down and total net flows rising, the ETH ETF effect could begin to play out in Ethereum's price.
The $ETH supply was created in 2024: $160 million.
— Michaël van de Poppe (@CryptoMichNL) August 7, 2024
The net inflow in $ETH ETF in the past 2 days: $150 million.
The demand is exceeding the supply.
I think Ethereum is super undervalued and ready for a big run if this inflow sustains. pic.twitter.com/KIpv7f1vNO
However, ETH declined briefly following bearish sentiment surrounding a now-deleted Lookonchain report that several wallets related to siezed assets from the Plus Token ponzi scheme moved 789,534 ETH worth about $2 billion.
EmberCN later confirmed that most of the 789,534 ETH entered the defunct exchange Bidesk in 2021 and should have already been sold. "There's not such a huge amount of ETH waiting to be sold [...] Most of them should have been sold in 2021, and what is currently being transferred is a small part that wasn't sold in 2021,” wrote EmberCN.
Meanwhile, Jump Trading may have resumed its ETH selling spree today after redeeming and transferring 11,501 ETH worth $29.11 million from Lido. The firm also applied to redeem an additional 19,049 ETH, reducing its remaining balance to 21,394 wstETH.
Jump Trading was reportedly selling 120,695 ETH since July 24 following the Commodity & Futures Trading Commission's (CFTC) investigations into the company's crypto division.
ETH technical analysis: Ethereum's decline could be a slingshot pullback for potential rally
Ethereum is trading around $2,400 on Wednesday, down more than 5% on the day. The decline has seen ETH sustain $53.56 million in liquidations within the past 24 hours, with long and short liquidations accounting for $38.23 million and $15.34 million, respectively.
ETH/USDT Daily chart
ETH could decline further in the coming weeks to reach a swing range low around the $2,000 psychological level before rallying. ETH posted similar declines between August 2022 to November 2022 and July 2023 to August 2023 before seeing a rally.
On the upside, ETH faces resistance around the $3,250 to $3,300 range, where the 50, 100 and 200-day Simple Moving Averages (SMAs) are looking to converge.
Meanwhile, ETH's Relative Strength Index (RSI) is in the oversold region. Whenever the RSI drops below 30, it indicates an asset is oversold while overbought when above 70. ETH's RSI dropped to 20 in the past day, indicating a buy signal. Historically, ETH has consolidated for a few weeks and then rallied whenever its RSI approached this level.
ETH's stochastic oscillator also indicates a similar buy signal after the %K line — which is now below 20 — crossed above the %D line. Whenever the stochastic oscillator makes such a move, it indicates a potential buy signal. The indicator also signals a potential bullish divergence after making a higher low when ETH posted a lower low on the daily chart.
The thesis will be invalidated if ETH falls sharply below the $2,000 psychological level.
Ethereum FAQs
Ethereum is a decentralized open-source blockchain with smart contracts functionality. Serving as the basal network for the Ether (ETH) cryptocurrency, it is the second largest crypto and largest altcoin by market capitalization. The Ethereum network is tailored for scalability, programmability, security, and decentralization, attributes that make it popular among developers.
Ethereum uses decentralized blockchain technology, where developers can build and deploy applications that are independent of the central authority. To make this easier, the network has a programming language in place, which helps users create self-executing smart contracts. A smart contract is basically a code that can be verified and allows inter-user transactions.
Staking is a process where investors grow their portfolios by locking their assets for a specified duration instead of selling them. It is used by most blockchains, especially the ones that employ Proof-of-Stake (PoS) mechanism, with users earning rewards as an incentive for committing their tokens. For most long-term cryptocurrency holders, staking is a strategy to make passive income from your assets, putting them to work in exchange for reward generation.
Ethereum transitioned from a Proof-of-Work (PoW) to a Proof-of-Stake (PoS) mechanism in an event christened “The Merge.” The transformation came as the network wanted to achieve more security, cut down on energy consumption by 99.95%, and execute new scaling solutions with a possible threshold of 100,000 transactions per second. With PoS, there are less entry barriers for miners considering the reduced energy demands.
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