Ethereum's 5% Drop Explained
Ethereum (ETH) fell more than 5% on Wednesday due to fears that a $2 billion ETH supply would flood the market. However, EmberCN clarified that this misinterpretation was incorrect: “There's no $2 billion worth of ETH supply waiting to flood the market.” Most of these funds had already been sold in 2021, according to EmberCN.
Ethereum ETF Investors Counter Bearish Sentiment
Despite the bearish sentiment, Ethereum ETF investors are demonstrating continuous buying pressure. On Tuesday, there was a significant net inflow of $98.4 million into Ethereum ETFs. BlackRock's ETHA and Fidelity's FETH saw inflows of $109.9 million and $22.5 million, respectively. Although Grayscale Ethereum Trust (ETHE) had outflows of $39.7 million, this was its lowest since ETH ETFs were launched.
The total net asset value of Ethereum ETFs on Tuesday was $7.06 billion. With ETHE outflows slowing down and total net flows rising, the ETH ETF effect could positively impact Ethereum's price.
Misleading Reports and Market Reactions
The recent decline in ETH prices was partly due to a now-deleted Lookonchain report, which incorrectly suggested that wallets related to the Plus Token ponzi scheme had moved 789,534 ETH worth about $2 billion. EmberCN later confirmed that most of these funds had entered the defunct exchange Bidesk in 2021 and had likely already been sold.
Additionally, Jump Trading resumed its ETH selling spree today after redeeming and transferring 11,501 ETH worth $29.11 million from Lido. The firm is also planning to redeem an additional 19,049 ETH, reducing its remaining balance to 21,394 wstETH.
Technical Analysis: Future Outlook for Ethereum
Ethereum was trading around $2,400 on Wednesday, down more than 5%. During this decline, ETH sustained $53.56 million in liquidations within 24 hours. Technical indicators suggest that ETH could decline further to around the $2,000 psychological level before rallying.
ETH faces resistance between the $3,250 to $3,300 range, where the 50, 100, and 200-day Simple Moving Averages (SMAs) are converging. Meanwhile, Ethereum's Relative Strength Index (RSI) is in the oversold region, dropping to 20, indicating a buy signal.
The stochastic oscillator also indicates a potential buy signal, with the %K line below 20 crossing above the %D line. This indicator suggests a potential bullish divergence.
However, the bullish outlook will be invalidated if ETH falls sharply below the $2,000 level.
Understanding Key Terms
Ethereum (ETH)
Ethereum is a blockchain-based platform known for its smart contracts. These are self-executing contracts where the terms are directly written into code. ETH is its native cryptocurrency.
FUD
FUD stands for Fear, Uncertainty, and Doubt. It refers to the spread of misleading or negative information to influence market sentiment.
ETF
An ETF (Exchange-Traded Fund) is a type of investment fund that is traded on stock exchanges, much like stocks. ETFs hold assets such as stocks, commodities, or bonds.
Liquidation
In the context of cryptocurrency trading, liquidation refers to the sale of an asset to cover a loss. This can happen automatically when the price falls below a certain level.
