Ethereum could return to key support level as the Middle East crisis continues to affect the crypto market

• Ethereum ETF sees $48.6 million outflows amid escalating Middle East war.
• Ethereum’s net outflow suggests investors may be buying the dip.
• Ethereum may return to the $2,395 support level as funding rates have remained largely positive.

Ethereum (ETH) is trading around the psychological $2,400 level on Wednesday, down more than 4% after $48.6 million in outflows from ETF investors as the war between Israel, Hamas, Hezbollah and Iran affects market sentiment. However, buying pressure from spot traders on crypto exchanges could see the top altcoin return to the $2,395 support level.

Ethereum spot traders and ETF investors show mixed feelings

Ethereum and the larger crypto market fell on Wednesday after Iran fired missiles at Israel on Tuesday, widening the war between Israel and Hezbollah in Lebanon.

After Israeli officials said they would retaliate, investors are becoming increasingly cautious and are quickly moving away from the risk-on attitude seen in the past two weeks.

The shift in market sentiment is visible in Ethereum ETFs moving from large inflows last week to increased outflows on Tuesday. Following the market decline, products saw outflows of $48.6 million. Exits were dominated by $26.6 million, leaving Grayscale’s ETHE and Fidelity’s FETH to have an exodus of $25 million – the biggest exit day since launch.

However, spot traders may not be as bearish as ETF investors following ETH exchange flows over the past 24 hours. According to CryptoQuant data, investors are likely to buy the dip given that ETH has seen a net exchange outflow of nearly 40,000 ETH in the past few hours.

Ethereum Exchange Netflow

Net exchange flow is the difference between currencies entering and exiting an exchange. Unlike cryptoETFs, exits indicate increasing buying pressure, while the opposite is true for entries.

Ethereum could return to the $2,395 support level

Ethereum is trading around $2,400 on Wednesday, down more than 4% on the day. The top altcoin has supported liquidations of $63.55 million in the past 24 hours, with long and short liquidations accounting for $55.48 million and $8.07 million, respectively.

The sharp drop in prices following the war tensions in the Middle East on Tuesday saw ETH break above the key $2,595 level and break above the 50-day, 100-day and 200-day simple moving averages (SMA).

ETH/USDT 4 Hour Chart

However, Ethereum funding rates remained positive despite the price drop, indicating that a higher percentage of derivatives traders are still bullish, according to CryptoQuant data.

As a result, ETH will likely break above the $2,395 support level and make a move to the upside. If the warring tension persists, ETH is likely to break this support level, but buyers could step in as the $2,350 level is a crucial demand area where investors have purchased more than 52.53 million ETH, according to IntoTheBlock data .

The Relative Strength Index (RSI) and Stochastic Oscillator (Stoch) momentum indicators are in their oversold region, indicating bearish momentum.

A daily close of the candlestick below $2,207 will invalidate the thesis.