Ethereum ETFs See Poor Reception Five Weeks After Launch, Although ETH Shows Potential for 30% Growth

• Ethereum’s drop in open interest suggests traders are becoming extremely cautious.
• Spot traders could buy the dip on rising net ETH exchange outflows.
• Weak demand for Ethereum ETFs has pushed asset managers to consider filing for combined ETH and BTC spot ETFs.
• Ethereum could rise by 30% if the double bottom movement holds.

Ethereum (ETH) fell more than 2% on Wednesday as spot traders potentially turn to the market’s recent decline to buy the decline. Meanwhile, the top altcoin formed a double bottom on the daily chart, indicating the potential for a 30% upside.

Daily Market Reasons: ETH OI, Exchange Exits, Weak Ethereum ETFs

After ETH’s 9% drop on Tuesday, Ethereum open interest briefly fell nearly $1 billion to $10.42 billion before recovering slightly. Open interest (OI) is the total number of outstanding derivative positions in an asset’s market. A drop in OI indicates that traders are either liquidating or closing their positions. In the case of Ethereum, the drop in OI suggests that traders are becoming extremely cautious.

On the other hand, spot traders appear to be buying the dip as net inflows into the ETH exchange switched to net outflows of 65.2K ETH in the early hours of the US session, according to CryptoQuant data. Net exchange flow is the difference between currencies entering and exiting exchanges. Outputs suggest that buying pressure is dominant, while the opposite is true for inputs. If the buying pressure continues, ETH could see a correction to previous highs.

ETH Exchange Netflow

On the ETF side, Ethereum ETFs extended their streak to nine consecutive days of negative flows after posting net outflows of $3.4 million on Tuesday. Despite the drop in ETH prices, Fidelity’s FETH and Bitwise’s ETHW managed net inflows of $3.9 million and $1.9 million, respectively. However, $9.2 million in ETHE outflows from Grayscale reversed the overall figure to negative net flows. Unlike crypto exchanges, outflows in ETFs suggest dominant selling pressure and vice versa for inflows.

Rising outflows brought net flows of ETH ETFs in the first five weeks after launch to nearly $500 million. In comparison, Bitcoin ETFs saw net inflows of more than $5 billion in the 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. Analysts noted that grayscale ETHE outflows exceeded their expectations of around $1 billion. Weak demand for ETH ETFs has led asset managers to consider a mix of spot BTC and ETH ETFs.

“Due to the weaker demand for spot ether ETFs compared to bitcoin, there appears to be increasing interest among asset managers in requesting a combined ETF that provides exposure to bitcoin and ether,” they noted JP Morgan analysts.

ETH Technical Analysis: Ethereum Could Take a 30% Rally.

Ethereum is trading around $2,510 on Wednesday, down more than 2% on the day. Over the past 24 hours, ETH has seen liquidations of $85.45 million, 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 lows on August 8 and 27. When it occurs during a downtrend, the double bottom is considered a potential bullish reversal. However, ETH needs to rise above the neckline resistance at $2,817 to validate the pattern.

ETH/USDT Daily Chart

A successful completion of this move could send ETH up over 30% to the psychological level of $3,300. However, the 100- and 200-day simple moving averages (SMAs) could represent rising resistance. Failure to break above the $2,817 resistance could send ETH towards the support level around $2,320.

The Relative Strength Index (RSI) suggests that bearish momentum prevails as it is trending down after breaching its moving average on Monday.

The Stochastic Oscillator (Stoch) %K line crossed into oversold territory on Tuesday and is at 17 at the time of writing. If the %K line manages to break above its descending %D line in the oversold region, it could signal a bullish reversal.