Cryptocurrency Ethereum Faces Selling Pressure: Indications from CryptoQuant Highlight Concerns
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Ethereum (ETH) has seen a significant surge in its price, with the cryptocurrency climbing to its highest level since November 2021 on August 14, reaching $4,743. This bullish momentum has raised questions about the asset's future performance, particularly against Bitcoin (BTC).
Despite ETH's recent outperformance against BTC, there are signs of increased selling pressure. This pressure is primarily driven by a combination of technical exhaustion, liquidity concerns, derivatives market dynamics, and fragile on-chain activity.
After surging towards $4,900, indicators such as RSI divergence and thinning liquidity suggest potential short-term pullbacks or corrections, causing some traders to take profits and increase selling pressure. The recent breakout has also led to aggressive short squeeze activity, forcing bearish traders to cover positions and temporarily pushing prices up. However, this also introduces volatility and potential for increased selling once the squeeze subsides.
Large withdrawals of ETH from centralized exchanges and whale accumulation signal underlying demand, yet the rotation of whales between ETH and BTC can lead to transient selling pressure as portfolios rebalance. Additionally, despite inflows into ETH ETFs, some ETF outflows and collapsing transaction fees create challenges for miners and reduce market depth, increasing price volatility and selling pressure.
On-chain user activity remains lethargic, raising concerns about the sustainability of current price levels and prompting cautious selling by traders. Broader macroeconomic factors, including bearish sentiment and record liquidations triggered by Federal Reserve policy expectations, also impact market confidence, applying selling pressure even on outperforming assets like ETH.
Daily ETH inflows into exchanges have spiked, exceeding those of BTC, suggesting potential sell-side pressure. Spot Ethereum ETFs are recording more inflows compared to their Bitcoin counterparts. The ratio of ether's volume relative to BTC spiked to 1.66 last week, the highest since June 2017.
Despite these challenges, Ethereum's strong fundamentals, institutional adoption, and dwindling exchange reserves support bullish momentum. ETH's relative price against BTC is nearing overvalued levels, which could lead to headwinds in the near term. However, the ETH/BTC ETFs Holding Ratio is currently at 0.15, a significant rise from 0.05 three months ago, indicating growing investor interest in ETH.
At press time, the asset's value had declined slightly to $4,500. As the market continues to evolve, it will be interesting to see how Ethereum navigates these short-term challenges and whether it can maintain its bullish cycle against Bitcoin.
[1] Glassnode [2] Cointelegraph [3] The Block [4] CoinDesk [5] CoinMarketCap
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