Ethereum’s Bullish Divergence Invalidated
Ethereum (ETH) has been showing signs of weakness against Bitcoin (BTC), with the ETH/BTC price action chart deep in the red. The bullish divergence for ETH appears to be invalidated as it approaches the 0.04 BTC level. This suggests that Ethereum’s price action is not aligning with the expected upward trend, indicating potential further declines.
If Bitcoin continues its momentum towards the $61k-$62k range after reclaiming $57k, ETH could be expected to drop further. Currently, ETH lacks a solid support level, making it vulnerable to further declines. Traders will need to wait for better market conditions before any significant rebound can be expected. The ongoing inflows might help ETH regain stability, but for now, it remains weaker than Bitcoin.
Institutional Selling and Decreasing Volume
Global institutions are now selling off their Ethereum holdings, contributing to the bearish sentiment. For instance, Metalpha recently deposited 6,999 ETH, valued at $16.4 million, into Binance, adding to their total deposits of 62,588 ETH worth $145.1 million over the last six days. Their remaining ETH holdings now stand at just 23.5k ETH, worth $55 million. Metalpha has also liquidated its Layer 2 tokens such as Optimism (OP) and reduced its staked ETH (stETH) holdings to 1,907 stETH.
The ETH/BTC Relative Strength Index (RSI) highlighted this divergence, with the price action declining while the RSI formed higher lows – a sign of a potential reversal. However, the decreasing volume signals that ETH may soon dip below the 0.04 BTC level. If Bitcoin weakens, this could present a chance for ETH to reverse. Until confirmed otherwise, the bearish trend for ETH will remain the most likely scenario.
Ethereum CME Trading Volume
Additionally, ETH is likely to remain weak against BTC due to declining futures trading volume on the Chicago Mercantile Exchange (CME). In August, it fell by 28.7% to $14.8 billion, marking its lowest level since 2023. This decline in trading volume indicates reduced interest and activity in Ethereum futures, further contributing to its weakness.
Year-to-date, ETH’s price is also negative, with its exchange-traded funds (ETFs) having recorded negative net cumulative flows. The Ethereum Foundation is also selling ETH, adding further pressure on the price. This means that ETH may continue to decline before potentially rebounding, possibly in Q4 2024.
Crowd and Smart Money Sentiment
Finally, both crowd and smart money sentiment indicate bearishness for ETH. Retail traders and institutional investors agree that ETH remains bearish in the current market environment. This alignment between small and large players suggests that Ethereum’s downtrend may persist until market dynamics shift or a significant catalyst emerges to support a price recovery.
The sentiment among traders and investors is crucial in determining the future price action of ETH. The bearish sentiment indicates a lack of confidence in Ethereum’s short-term prospects, which could lead to further declines. However, if market conditions improve or a significant catalyst emerges, ETH could potentially rebound.
Conclusion
In conclusion, Ethereum is currently facing significant challenges, with its bullish divergence invalidated and institutional selling contributing to its weakness. The declining trading volume on the CME and negative sentiment among traders further exacerbate the situation. Until market conditions improve or a significant catalyst emerges, ETH is expected to remain weak against Bitcoin. Traders and investors should closely monitor market dynamics and be prepared for potential further declines in Ethereum’s price.
