Ethereum (ETH) has experienced a sharp decline in recent days, with the price falling by approximately 20% over the last four days. As of December 20, ETH is trading at $3,119, marking a 15% drop within just 24 hours. This bearish performance mirrors a broader downturn in the cryptocurrency market, with the total market capitalization decreasing by 9% to $3.21 trillion. Several factors are contributing to Ethereum’s downward price movement, making it a key topic for investors and traders to watch.
Futures Traders Turn Bearish
One of the major factors driving ETH’s price down is the shift in sentiment among futures traders. For the first time since November 6, the aggregated premium of Ethereum futures positions has turned negative, signaling a bearish outlook. This shift is a critical signal for market participants, indicating that traders are increasingly anticipating further declines in Ethereum’s value.
Massive Liquidation of Positions
ETH’s recent price drop triggered its largest liquidation event since December 9. Over $299 million worth of positions were liquidated, with $270 million of that total coming from long positions. Such massive liquidations can accelerate downward pressure on the market, leading to a cascading effect where the price falls rapidly as more positions are forcefully closed.
Ethereum ETFs See Outflows
In addition to the futures market turmoil, Ethereum exchange-traded funds (ETFs) are also experiencing significant outflows. After 18 consecutive days of positive net flows, US-based spot Ether ETFs recorded a net outflow of $60.47 million on December 19. Grayscale’s ETHE fund was primarily responsible for the outflows, with $58.13 million in withdrawals. This investor behavior points to a broader sentiment shift, as many are de-risking amid increased market volatility.
Ethereum’s recent price correction can also be attributed to profit-taking. Short-term holders, who benefited from ETH’s rally above $4,100, are now selling off their positions, contributing to the downward pressure. The Dormant Coins Circulation metric from Santiment shows a noticeable increase in the circulation of coins held for 90 to 365 days, signaling that short-term speculators are cashing in on their gains.
Technical Indicators and Market Outlook
On the technical front, Ethereum’s price has broken key support at the $3,500 level, forming a double-top pattern. This pattern suggests that the price could continue to decline, potentially reaching $3,000, based on the measured height of the pattern’s decline. Additionally, the appearance of a bearish cross on the four-hour chart indicates growing downward momentum. However, the relative strength index (RSI) has entered oversold territory, suggesting that a relief bounce could be imminent in the short term.
Also Read: Ethereum Layer-2 Networks Hit $13.5 Billion in Stablecoins as Market Cap Soars to $205 Billion
As Ethereum faces multiple headwinds, investors should remain vigilant, watching for potential recovery signals amid a challenging market environment.
Disclaimer: The information in this article is for general purposes only and does not constitute financial advice. The author’s views are personal and may not reflect the views of Chain Affairs. Before making any investment decisions, you should always conduct your own research. Chain Affairs is not responsible for any financial losses.
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