Ethereum (ETH) continues to face significant downward pressure, with its price dropping below $2,400 for the second time in just three days. As the broader crypto market watches in anticipation, many are wondering if this recent decline signals a bottom or the beginning of an extended price drop. On-chain analysis suggests the latter, as key indicators reveal a worrying trend.
Investor Sentiment Shifts Away from Ethereum
On August 24, Ethereum briefly rallied to $2,800, sparking hopes of a potential retest of the $3,000 mark. However, those expectations quickly faded as the cryptocurrency began to trend lower once again. As of press time, Ethereum is struggling to maintain support, with the Coinbase Premium Index showing alarming signs of a further drop.
The Coinbase Premium Index, which measures the price difference of Ethereum on Binance and Coinbase, is a critical metric for assessing U.S. investor sentiment. A high value typically suggests strong buying pressure in the U.S., while a low value indicates a lack of demand. According to data from CryptoQuant, the index has dropped to -0.042, signaling that U.S. investors are currently offloading their ETH holdings rather than accumulating them.
A Surplus of Ethereum on Exchanges
Another troubling sign for Ethereum is the growing amount of ETH flowing into centralized exchanges. On-chain data from Santiment reveals that the supply of Ethereum available on exchanges has surged, with more than 21 million ETH currently sitting on these platforms. One month ago, that number was 19.94 million, indicating a steady increase in supply as investors prepare to sell.
Typically, a low exchange supply signals bullish conditions, as investors prefer to hold their assets rather than sell them. However, the current increase in exchange-held Ethereum could exacerbate selling pressure, further driving the price down.
On the technical front, Ethereum’s price is testing a crucial demand zone between $2,200 and $2,350. If the cryptocurrency fails to hold above this range, it risks dropping to the next support level at $2,048.
Adding to the bearish outlook is the Relative Strength Index (RSI), a key momentum indicator. With the RSI currently below the neutral level, the downward momentum appears strong. Should this trend continue, Ethereum could face a steep decline toward $2,200, and potentially even lower, to the $1,577 mark.
Is There a Glimmer of Hope?
Despite the bearish indicators, some analysts believe that Ethereum could stage a recovery if market sentiment improves. A resurgence of buying pressure from U.S. investors, coupled with broader market support, could see ETH reclaim higher levels. If such a scenario unfolds, Ethereum might bounce back to the $2,800 range, offering a potential lifeline to holders.
Also Read: Ethereum Underperforms Bitcoin By 44% Since PoS Switch – CryptoQuant Data Reveals Decline
However, for now, the outlook remains cautious. Ethereum is walking a fine line, and its next moves could define its price trajectory in the coming weeks.
Ethereum’s price is at a critical juncture. While the recent dip below $2,400 has raised concerns, the real test lies ahead. Key on-chain metrics, including the Coinbase Premium Index and rising exchange supply, suggest further downside potential. Investors should brace for increased volatility, as Ethereum’s future hangs in the balance between bearish momentum and a potential recovery.
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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