- Ethereum's declining open interest suggests traders are becoming extra cautious.
- Spot traders may be buying the dip following growing ETH exchange net outflows.
- Weak demand for Ethereum ETFs has pushed asset managers to consider filing for combined spot ETH and BTC ETFs.
- Ethereum could rally by 30% if double bottom move holds.
Ethereum (ETH) is up over 2% on Wednesday as spot traders are potentially pouncing on the recent market decline to buy the dip. Meanwhile, the top altcoin has formed a double bottom on the daily chart, indicating potential for a 30% rally.
Daily digest market movers: ETH OI, Exchange outflows, weak Ethereum ETFs
Following ETH's 9% plunge on Tuesday, Ethereum open interest briefly declined by almost $1 billion to $10.42 billion before recovering slightly. Open interest (OI) is the total number of outstanding derivatives positions in an asset's market. A decline in OI indicates that traders are either liquidating or closing their positions. In the case of Ethereum, the drop in OI suggests traders are becoming extra cautious.
On the other hand, spot traders appear to be buying the dip, considering that the ETH exchange netflow flipped to net outflows of 65.2K ETH in the early hours of the American session, per CryptoQuant's data. Exchange netflow is the difference between coins flowing in/out of exchanges. Outflows suggest buying pressure is dominant, while vice versa for inflows. If the buying pressure sustains, ETH could see a correction to previous highs.
 - All Exchanges (2)-638604679950927288.png)
ETH Exchange Netflow
On the ETF front, Ethereum ETFs stretched their streak to nine consecutive days of negative flows after posting net outflows of $3.4 million on Tuesday. Despite ETH's price decline, Fidelity's FETH and Bitwise's ETHW managed net inflows of $3.9 million and $1.9 million, respectively. However, $9.2 million in outflows from Grayscale's ETHE flipped the total net flows figure negative. Unlike crypto exchanges, outflows in ETFs suggest dominant selling pressure and vice versa for inflows.
The increasing outflows have brought ETH ETFs' net flows in the first five weeks after launch close to $500 million. In comparison, Bitcoin ETFs saw over $5 billion in net inflows within their first five weeks.
According to JP Morgan analysts, the weak flows of ETH ETFs compared to Bitcoin ETFs were expected due to the absence of staking and lower liquidity. The analysts noted that Grayscale ETHE outflows exceeded their ~$1 billion expectations. The weak demand for ETH ETFs has led asset managers to consider a combined spot BTC and ETH ETF.
"Due to weaker demand for spot ether ETFs compared to bitcoin, there appears to be a growing interest among asset managers to file for a combined ETF that offers exposure to bitcoin and ether," noted JP Morgan analysts.
ETH technical analysis: Ethereum could stage 30% rally
Ethereum is trading around $2,520 on Wednesday, up more than 2% on the day. In the past 24 hours, ETH has seen $85.45 million in liquidations, with long and short liquidations accounting for $67.29 million and $18.16 million, respectively.
Ethereum is forming a W pattern or double bottom on the daily chart after posting two key price bottoms on August 8 and 27. When it occurs during a downtrend, the double bottom is considered a potential bullish reversal. ETH has to rally above the neckline resistance at $2,817 to validate the pattern however.
ETH/USDT Daily chart
A successful completion of this move could see ETH rise by over 30% to the $3,300 psychological level. However, the 100-day and 200-day Simple Moving Averages (SMA) could stand as resistance on the way up. Failure to move above the $2,817 resistance could send ETH toward the support level around $2,320.
The Relative Strength Index (RSI) suggests that bearish momentum is prevailing, as it is trending toward the downside after breaching its moving average on Monday.
The %K line of the Stochastic Oscillator (Stoch) crossed into the oversold region on Tuesday and is at 17 at the time of writing. If the %K line manages to cross above its descending %D line in the oversold region, it could signal a bullish reversal.
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.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended Content
Editors’ Picks
Top 3 Price Prediction Bitcoin, Ethereum, Ripple: BTC declines as resistance emerges near all-time high
Bitcoin and Ethereum are approaching their key support levels, and a sustained close below these marks could lead to further declines.
TON set to launch synthetic Bitcoin to boost its DeFi solutions
TON revealed its plan on Thursday to launch a synthetic Bitcoin token on its blockchain, allowing users to trade, stake, and earn yield using BTC. Following the announcement, TON is down over 3%.
Maker Price Forecast: MKR could stage 40% rally
MakerDAO is up 2% on Thursday and could be set for a 40% rise in the coming weeks if it successfully maintains an extended move above the descending trendline of a falling wedge. On-chain data also supports the bullish outlook after a four-month-long decline.
USDT market cap crosses $120 billion as stablecoins continue their uptrend
The stablecoin market cap continued its uptrend in October, characterized by USDT reaching a $120 billion market cap, according to a CCData report on Thursday. This indicates that investors are preparing liquidity to fuel more demand.
Bitcoin: New all-time high at $78,900 looks feasible
Bitcoin price declines over 2% this week, but the bounce from a key technical level on the weekly chart signals chances of hitting a new all-time high in the short term. US spot Bitcoin ETFs posted $596 million in inflows until Thursday despite the increased profit-taking activity.
Best Forex Brokers with Low Spreads
VERIFIED Low spreads are crucial for reducing trading costs. Explore top Forex brokers offering competitive spreads and high leverage. Compare options for EUR/USD, GBP/USD, USD/JPY, and Gold.