Ethereum risks 25% drop if it fails to break key trendline as investor pile-up continues

• Ethereum ETFs posted $5 million in net inflows as Grayscale Ethereum Trust ended its streak of exits.
• Investors are hoarding Ethereum, as evidenced by rising outflows and falling reserves on ETH exchanges.
• Key technical indicators suggest Ethereum could drop 25% to approach the psychological $2,000 level.

Ethereum rose more than 2% on Tuesday on minor inflows in ETH ETFs. ETH technical indicators suggest that its price may approach the psychological level of $2,000 in the coming weeks, but investor accumulation may prevail due to key on-chain values.

Daily Market Reasons: ETH ETF Flows, Investor Accumulation

Ethereum ETFs saw minor net inflows of $5 million on Monday, according to data from Farside Investors. The net inflows came after three consecutive days of net outflows in the nine US spot ETH ETFs.

Grayscale Ethereum Trust (ETHE) had zero inflows, the first time it has seen no outflows since the launch of ETH ETFs. Fidelity’s FETH led the way with net inflows of $4 million, followed by Bitwise’s ETHW, which saw inflows of $2.9 million. Notably, VanEck’s ETHV posted net outflows for the first time, posting a loss of $2.9 million.

Ethereum ETF Streams

Meanwhile, CryptoQuant data shows that Ethereum has seen a net exchange outflow of over 306,000 ETH since the market plunge on August 5.

ETH foreign exchange reserves also depleted to a one-month low of 16.8 million ETH as it has been in a downtrend since August 2nd. A decline in foreign exchange reserves suggests greater buying pressure.

ETH exchange reserve – All exchanges

Net ETH forex outflows and declining forex reserves suggest that investors are hoarding ETH in anticipation of a potential price increase.

ETH Technical Analysis: Ethereum could approach the psychological level of $2,000

Ethereum is trading around $2,710 on Tuesday, up 2% on the day. In the past 24 hours, over $27 million has been liquidated, with long and short liquidations accounting for $16.29 million and $11.28 million, respectively.

Ethereum price mimics the cautious sentiment in the crypto market with a downside bias. This is evident in the ETH Long/Short ratio, which fell from 1.01 to 0.91, indicating that the bears have slightly prevailed over the bulls over the past 24 hours.

ETH saw a rejection around $2,730, a few cents above the key resistance level of $2,723. The move follows a key trend line that suggests ETH could drop 25% to record a low around $2,020 before rebounding.

As previously discussed, ETH posted similar moves from August 2022 to November 2022 and from July 2023 to October 2023, after which it rallied. Therefore, the $2,020 price level could be key to watch for the sellers to run out and a potential fresh rally in the coming weeks.

ETH/USDT Daily Chart

The %K line of the stochastic oscillator (Stoch) was rejected at the 50 midpoint and is now at 48, tilting slightly lower in an attempt to break below the %D line. Such a move in the Stoch indicates caution, with sentiment leaning toward a near-term bearish move.

The Fibonacci retracement (Fib) suggests that ETH could find support at the 23.6% level, which is currently around $2,453. The 23.6% level is one of the key Fib levels, along with 38.2%, 50% and 61.8%. When an asset’s price retraces part of its previous move, traders often watch these Fib levels to see if they will act as support or resistance. Therefore, if ETH moves below $2,453, it will lend credence to the short-term bearish outlook.

A daily ETH candlestick close above the 50% Fib retracement level around $2,836 will invalidate the bearish thesis.