July 23, 2024
Ethereum Declines Amid Mixed Market Updates, Analysis
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Ethereum Declines Amid Mixed Market Updates: Analysis

While the Ethereum protocol boasts promising updates, ETH continues to struggle below $3,700. A sharp downtick in social metrics favors the bears, yet strong fundamentals spur optimism in Ether’s prospects. But which factors are leading in market sentiment?

Ethereum Deposits Decreasing Despite Positive Address Momentum

Data from Glassnode indicates that the amount of Ether (ETH) held on exchanges has reached its lowest point in eight years. This may signal decreased speculative interest in Ether, likely due to post-ETF approval market shock, yet it marks a strong holding tendency. According to IntoTheBlock’s data, 89% of Ethereum holders are profitable, a robust indicator of a healthy market.

Ethereum: balance on exchanges (total). Source: Glassnode

The data also reveals that Ethereum is predominantly held by whales, with 51% of the assets concentrated in large holders’ wallets. Furthermore, CoinShares recently reported that Ether investment products saw a total inflow of $69 million for the week, reaching a three-month record. This correlates with a notable increase in transactions exceeding $100k, demonstrating institutional and large-scale investor optimism regarding Ethereum’s long-term prospects due to its exchange-traded funds (ETFs) approval.

Ethereum (ETH) trading activity. Source: IntoTheBlock

Declining Sentiment Despite Positive Metrics

Despite these positive metrics, overall sentiment towards Ethereum has registered a sharp decline since the beginning of the month. Sentiment’s data reveals that Ether’s weighted sentiment indicates a negative rate after its surge at the end of May, coinciding with the ETF-fueled spike. An analysis of the social volume also showed downticks corresponding to decreases in weighted sentiment.

Despite the weak sentiment, Ethereum still sees a positive new address momentum. At the time of writing, the number of new addresses exceeds 105,000, indicating ongoing interest and activity within the network.

Ethereum: number of new addresses. Source: Glassnode

Chart Analysis Favors Bears

According to Ether’s daily chart, the asset faced heightened selling activity after a brief period of consolidation near the crucial $4,000 resistance level. This highlights the price level as a key point for short positions. Nonetheless, there is a significant support zone ahead, including the 100-day moving average at $3,431.05 and the 0.5 Fibonacci retracement level at $3,419. This suggests that the current price action may continue its bearish retracement in the short term, with the 100-day moving average and the 0.5 Fib level acting as primary support for buyers.

The 4-hour chart indicates strong sideways movement for Ethereum. According to the graph, the aforementioned consolidation in the $4,000 area has formed a head-and-shoulders pattern, indicating a lack of bullish momentum and an increase in supply. Consequently, this pattern may signal an eventual bearish reversal, especially if the price breaks below the neckline of the formation. The dominance of sellers is also marked by a bearish divergence between the relative strength index (RSI) and the price movement.

Currently, the price is at a critical support level of around $3.6K. If sellers manage to breach this pivotal level, continuing the bearish trend is the most likely outcome.

Uncertainty Ahead

Controversial Ethereum updates only emphasize the vagueness of the coin’s trend. While traders have a perfect opportunity to buy, they should closely monitor upcoming updates from the Federal Reserve on interest rates in the US—a crucial factor influencing the cryptocurrency market.

Image by Peter Patel from Pixabay

Disclosure Statement: Miami Crypto does not take any external funding, or support to bring crypto news to the readers. We do not have any conflicts of interest while writing news stories on Miami Crypto.

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