Is the Ethereum (ETH) Price Downtrend Coming to an End? The information on the chain gives a clue
TLDR
Ethereum's price has dropped below $3,000 since early August, currently trading at $2,679. Ethereum gas prices hit a low of 1.06 Gwei on Saturday, which caused less ETH to burn. The total supply of Ethereum has been growing steadily since April 2024. Global Ethereum ETFs saw moderate inflows of $4.2 million last week, while US ETFs had losses of $14.1 million. Some on-chain metrics suggest that Ethereum's price correction is nearing its end.
Ethereum, the second largest by market cap, has been struggling in recent weeks.
Since early August, Ethereum's price has fallen below a key $3,000 level, currently trading at $2,679, according to CoinMarketCap data. This represents a 23.57% decline since July 23rd.
As reported by Ultrasound.money, Ethereum gas prices reached a low of 1.06 Gwei on Saturday. Gas fees are transaction costs on the Ethereum network, measured in Gwei. This dramatic movement in payments is due to increased activity on Layer 2 protocols and the recent Denkun update implemented in March.
While lower transaction costs benefit network users, they also have implications for Ethereum tokenomics. The decrease in gas fees led to less ETH being burned, thereby increasing the total supply of Ethereum tokens.
According to data from CryptoQuant, between April and August 2024, the total supply of Ethereum increased by more than 220,000 ETH.
This increase in supply Against the backdrop of the launch of Ethereum ETFs on July 23rd. Contrary to some expectations, the ETF launch did not provide a major boost to the price of Ethereum. In fact, US-based Ethereum ETFs have recorded $434 million in net inflows since debut, putting additional selling pressure on the asset.
Global Ethereum ETFs paint a slightly different picture, with CoinShares data showing minimal inflows of $4.2 million last week. However, US spot ETH ETFs saw net inflows of $14.1 million over the same period. These figures suggest a cautious approach by investors, which is reflected in the price movement of Ethereum Choppy and the reading of the Fear and Greed Index of 34, which indicates fear in the market.
Some indicators suggest that Ethereum's price correction is nearing its end.
CryptoQuant author Burak Kesmechi points to two on-chain indicators: Taker Buy Sell ratio and Open Interest (OI). The bid-ask ratio, which calculates the ratio of buyers to sellers on major cryptocurrency exchanges, has “turned positive again” according to Kesmeci.
Open interest, which represents the total number of outstanding options contracts, stood at $10.69 billion as of August 19, up roughly 10% from the previous day. Kesmeci suggests that for a significant upward price movement, “lucky players need to get back into position.”
However, not all indicators are bullish. The formation of a death cross pattern on the Ethereum price chart, where the 20-day EMA has crossed below the 200-day EMA, indicates the accumulation of bearish sentiment. Additionally, Ethereum is currently trading below all key moving averages, which further reinforces the bearish stance on the market.
In the spread market, funding volume has turned negative, indicating that short positions are currently dominant. This pessimism is reflected in recent liquidity, Ethereum saw $30.8 million in liquidity in the last 24 hours, $28 million of which were long positions.
Looking ahead, the cryptocurrency market, including Ethereum, is sensitive to macroeconomic issues.
Investors are closely watching signals from the Federal Reserve regarding interest rate cuts. The minutes of the FOMC meeting to be released on August 24 and Federal Reserve Chairman Jerome Powell's speech at the Jackson Hole Symposium on August 21 are expected to provide additional insights into the US economic outlook and monetary policy direction.
