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Ethereum (ETH) trades above the $4,400 price mark following a rather eventful market week. Although CoinMarketCap data reports the altcoin notched up a net weekly gain of 4.21%, a sharp 7.14% pullback toward the end of the week has dampened sentiment, introducing a more cautious undertone. With ETH now consolidating in a sideways range, crypto analyst Amr Taha has outlined both short and long-term market outlooks, drawing on recent exchange flows and futures market activity.
In a recent QuickTake post on CryptoQuant, Taha provides valuable insight into the price trajectory of Ethereum as both futures market positioning and exchange balances are undergoing significant changes. In studying recent developments in the derivative markets, the crypto expert observes a 29% decline in Open Interest over the past two days, following a drop in ETH prices from above $4,700 to below $4,400, which suggests that traders are rapidly closing or liquidating positions amid market turbulence.
Adding to the bearish atmosphere, perpetual futures funding rates turned negative across major exchanges. Negative funding rates occur when short positions dominate, meaning traders are paying to maintain bearish bets. While this reflects prevailing pessimism, Amr Taha states that history shows that such extremes often coincide with oversold conditions and can precede a rebound if other bullish catalysts emerge.
Amid this derivative market situation, spot market data paints a different picture. In recent days, Taha explains that 200,000 ETH, worth approximately $888 million, were withdrawn from major centralized exchanges. Coinbase saw an outflow of 128,000 ETH, while Binance recorded 72,000 ETH leaving its platform.
Generally, large-scale exchange withdrawals are often interpreted as a bullish signal. When investors remove funds from trading platforms, they typically move them into cold storage wallets for multiple reasons, such as long-term holding or staking, which signals confidence in future price appreciation. There are also instances where institutions move their assets off exchanges to perform over-the-counter (OTC) transactions.
This dual narrative, i.e., bearish derivatives activity and bullish spot outflows, highlights Ethereum’s complex short-term outlook. On one hand, negative funding rates and collapsing open interest indicate traders are cautious, expecting further downside in the near term. On the other hand, shrinking exchange balances reduce immediate selling pressure, creating conditions that could support a strong price floor.
Interestingly, Amr Taha also notes that similar waves of ETH withdrawals from exchanges have preceded notable rallies, as reduced exchange liquidity tightens supply, indicating potential for a long-term price rally.
At press time, Ethereum trades at $4,446, reflecting a 0.19% gain in the past day. Notably, investors’ attention remains heavily on the 4,400 support level in the coming sessions. A decisive bounce could validate the view that Ethereum is oversold, while sustained weakness may see ETH retest lower zones before a potential recovery.
Featured image from The Economic Times, chart from Tradingview
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The cryptocurrency market is presently experiencing a substantial decline, as both Bitcoin and Ethereum have experienced a substantial decrease in active addresses. This trend, which has persisted throughout 2024, has triggered apprehension regarding the future of these prominent cryptocurrencies. The implications for market dynamics could be profound as investor enthusiasm diminishes.
According to the latest stats from CryptoQuant, Bitcoin’s active addresses have contracted by about 1.17 million to 855,000, whereas Ethereum has reduced by about 382,000 to 312,000. This equates to a 27% drawdown for Bitcoin and an 18% decline for Ethereum year-to-date.
The absence of new investors entering the market appears to be the primary cause of this decline. This is essential for maintaining favorable momentum, as existing participants dominate trading activity in the absence of new capital inflows.
Since early 2024, active Bitcoin and Ethereum addresses have been declining
“For the bulls to dominate the market, the influx of new investors is a crucial condition.
1. Bitcoin 1.17M -> 855K
2. Ethereum 382K -> 312K” – By @burak_kesmeciFull post
https://t.co/gZftQidnxa pic.twitter.com/q5cdpv7x6t
— CryptoQuant.com (@cryptoquant_com) October 1, 2024
The anticipated excitement surrounding the approval of spot ETFs has not translated into increased activity on the blockchain. Still, the current user base carries a lot of investors who would have expected such developments. The continued quantitative tightening of the Federal Reserve continues to strip liquidity from the market, adding more pressure to the situation.
There are, however indications that a potential rebound is near in the face of these challenges. For example, funding rate on Ethereum has remained positive for the past week, meaning there is growing interest among investors in long positions. This implies that whereas plunges in the price of Ethereum have been ongoing, a good majority of the market remains optimistic regarding its performance going forward.
BTC and ETH addresses decline: BTC drops to 855K, ETH to 312K in 2024
Since the start of 2024, the number of active Bitcoin and Ethereum addresses has continued to drop. Bitcoin addresses fell from 1.17 million to 855,000, while Ethereum addresses declined from 382,000 to…
— CoinNess Global (@CoinnessGL) October 1, 2024
It’s quite interesting that large Ethereum holders have been accumulating their assets, rather than selling them off. These large holders reduced their outflows from 311,950 to 139,390, suggesting they have confidence in the long-term prospects of the altcoin. Investors that do this kind of action usually expect the prices to recover soon.
Furthermore, Bitcoin’s Exchange Flow Multiple has experienced a substantial decline. This metric contrasts with short-term inflows and outflows with those over a lengthier period, indicating that current trading activity is significantly lower than historical averages. A low Exchange Flow Multiple typically suggests that investors are holding their assets in anticipation of future price increases rather than actively trading them.
The broader bitcoin market is negotiating a complicated terrain molded by geopolitics concerns and legislative changes. Recent occurrences have helped investors to be generally more cautious. For instance, despite market volatility causing Ethereum to tumble to about $2,390, Bitcoin has managed to remain constant above $61,100.
Featured image from Vecteezy, chart from TradingView
ECB President Christine Lagarde said that they would conduct significant rate hikes in the coming months and there’s no decision on pivoting anytime soon.
On Thursday, December 15, a day after the Federal Reserve announced a 50 basis points rate hike, the European Central Bank (ECB) also announced a smaller rate hike taking interest rates from 1.5% to 2%.
However, the bank has said that it would rate hikes “significantly” in the future to tame inflation and shrink its balance sheet. Starting March 2023, ECB plans to reduce its balance sheet by 15 billion euros ($15.9 billion) per month on average. This would further continue until the end of the second quarter of 2023.
In February, ECB will reveal more details on the reduction of the asset purchase program (APP). In the meanwhile, it will continue to reassess its position to stay on track with its monetary policy strategy. Earlier this year in July, the ECB raised interest rates by 50 basis points.
Later in September and October, it raised by 75 basis points each getting interest rates out of the negative territory for the first time in eight years. In a statement on Thursday, the ECB noted:
“The Governing Council judges that interest rates will still have to rise significantly at a steady pace to reach levels that are sufficiently restrictive to ensure a timely return of inflation to the 2% medium-term target”.
There’s been an uproar in the global financial markets and it’s only a matter of time before the ECB decides to pivot. However, ECB President Christine Lagarde has made her intentions clear adding that they won’t pivot anytime soon.
“Anybody who thinks this is a pivot for the ECB is wrong. We’re not pivoting, we’re not wavering, we are showing determination and resilience in continuing a journey where we have. … If you compare with the Fed, we have more ground to cover. We have longer to go. We’re not slowing down. We’re in for the long game,” she said.
The central bank said that it expects the Eurozone inflation to stay above 2% up to 2025. It sees that average inflation to drop to 6.3% in 2023, 3.4% in 2024 and 2.3% in 2025.
Market analysts believe that the hawkish stand by the Fed could lead to a major recession in the coming times. But the ECB believes that it would be “relatively short-lived and shallow”. Speaking on the decision relating to quantitative tightening, Lagarde said that the ECB wants to follow the principles of being predictable and measured.
The central bank is looking to reduce its balance sheet over the next year. Lagarde said that this decision comes on advice from its market team, all central banks, and other officials involved. “It seemed an appropriate number in order to normalize our balance sheet, bearing in mind that the key tool is the interest rate,” she added.
Bhushan is a FinTech enthusiast and holds a good flair in understanding financial markets. His interest in economics and finance draw his attention towards the new emerging Blockchain Technology and Cryptocurrency markets. He is continuously in a learning process and keeps himself motivated by sharing his acquired knowledge. In free time he reads thriller fictions novels and sometimes explore his culinary skills.
The world’s largest cryptocurrency Bitcoin (BTC) has been trading in a pretty tight range recently close to $19,200 level. On one hand, the Bitcoin hashrate continues to grow fast, which means that Bitcoin miners have to put more computational power to add new blocks to the Bitcoin blockchain.
As energy costs rise at the same speed, Bitcoin miners have been getting paper-thin margins on their mining revenue. This could probably lead to another major sell-off by Bitcoin miners as we saw earlier this year. As on-chain data provider Glassnode explains:
The #Bitcoin Hash Price has reached an all-time-low of $66,500 per Exahash. This means that $BTC miners are earning the smallest reward relative to hashpower applied in history, and likely puts the industry under extreme income stress.
Earlier this month, Arcane Research published a report stating that the miner revenues have dropped by 81% from their peak in October 2021. Also, a large majority of miners saw their gross margins drop to 30%-40% from 80%-90% area. The Arcane Research report notes:
“Unfortunately, most miners today are, to a varying degree, exposed to rising power prices. The mining industry has already become almost eradicated in Europe due to the energy crisis, but American miners also feel the heat.
Power prices in the US, where a significant portion of the industrial-scale miners are located, have increased considerably and will likely keep rising as natural gas prices go up.”
While the Bitcoin hash price is making new lows, Bitcoin long-term holders on the other hand have been showing great conviction. Citing data from Glassnode, crypto analyst Will Clemente explains:
“A new all-time high 78% of Bitcoin supply has not moved in at least 6 months. Pretty remarkable in the face of the worst macroeconomic backdrop in recent history, geopolitical uncertainty, and WW3 fears. There is a group of seriously convicted HODLers out there”.
Bloomberg analyst Mike McGlone recently said that Bitcoin is entering an “unstoppable maturation stage“. He believes that the BTC price will continue to rise despite the Fed rate hikes ahead this year.
It will be interesting to see that if the Bitcoin miners trigger a selling going ahead, will the long-term holders continue to show the same level of conviction? As of press time, Bitcoin (BTC) is trading at $19,340 with a market cap of $372 billion.
The presented content may include the personal opinion of the author and is subject to market condition. Do your market research before investing in cryptocurrencies. The author or the publication does not hold any responsibility for your personal financial loss.