- Ethereum faced a sharp rejection at the $3.5K resistance, leading to a 38% price drop to $2,125 before rebounding to $2,921.
- Open Interest (OI) saw a massive wipeout, with liquidations across the market estimated between $8 billion and $10 billion.
- On-chain metrics, such as the Taker Buy-Sell Ratio and Exchange Netflows, highlighted bearish sentiment and selling pressure.
- Dormant circulation spiked during the price drop, while the Mean Coin Age plateaued, signaling mixed long-term investor behavior.
- Despite bearish sentiment, slight exchange outflows and Mean Coin Age trends offered faint signs of potential accumulation.
Ethereum’s Price Collapse and Open Interest Wipeout
Ethereum’s recent price action has been nothing short of dramatic. After facing rejection at the critical $3.5K resistance level, the cryptocurrency experienced a steep 38% drop, bottoming out at $2,125. This sharp decline sent shockwaves through the market, triggering widespread panic and liquidations. However, Ethereum managed to stage a partial recovery, bouncing back to $2,921 within hours of the crash.
The sudden price drop had a profound impact on Open Interest (OI) across the market. Estimates suggest that liquidations ranged between $8 billion and $10 billion, wiping out a significant portion of leveraged positions. Ethereum’s OI levels have now returned to those seen in mid-November, but the price remains approximately 12% lower than it was during that period. This disparity underscores the bearish sentiment that has gripped the market, leaving traders and investors uncertain about the path forward.
Bearish On-Chain Metrics and Selling Pressure
On-chain data paints a grim picture for Ethereum in the short to medium term. The Taker Buy-Sell Ratio, which measures the volume of buyer versus seller activity in perpetual swaps, has been predominantly negative for the past three months. This indicates that sellers have consistently dominated the market, reflecting heightened fear and a lack of confidence among traders. Unlike Bitcoin and other large-cap altcoins, Ethereum has struggled to maintain a strong upward trajectory, further amplifying bearish sentiment.
Exchange Netflows also highlight the selling pressure Ethereum has faced. Positive netflows, which indicate more ETH being deposited into exchanges than withdrawn, were observed during the November price rally. However, as prices began to decline, these inflows persisted, signaling increased potential for sell-offs. Over the past two days, the 7-day Moving Average (MA) of netflows turned slightly negative, suggesting minor outflows and potential accumulation. While this is a modestly positive sign, it is not enough to offset the broader bearish trends.
Dormant Circulation and Long-Term Investor Behavior
Dormant circulation, a metric that tracks the movement of previously inactive coins, saw a significant spike during Ethereum’s retest of the $3.5K resistance on January 31. This coincided with a period of heavy losses in U.S. tech stocks, suggesting a broader risk-off sentiment in financial markets. The spike in dormant circulation indicates that long-term holders were moving their assets, potentially to sell during the price drop. This behavior further underscores the bearish sentiment that has dominated the market in recent days.
Meanwhile, the Mean Coin Age, which measures the average age of all coins on the network, has plateaued over the past two weeks. This follows a period of upward movement that began in late December. A similar pattern was observed in September, suggesting that long-term holders are adopting a wait-and-see approach. While the plateau in Mean Coin Age could indicate a pause in selling activity, it also reflects uncertainty among investors about Ethereum’s future price direction.
Mixed Signals: Bearish Sentiment vs. Faint Bullish Hopes
Despite the overwhelmingly bearish sentiment, there are a few glimmers of hope for Ethereum bulls. The slight negative exchange netflows over the past two days suggest that some investors are beginning to accumulate ETH at lower prices. Additionally, the plateau in Mean Coin Age indicates that long-term holders are not yet capitulating, which could provide a foundation for future price stability.
However, these modestly positive signals are overshadowed by the broader market dynamics. The Funding Rate for Ethereum has been negative in recent days, reflecting a bearish outlook among traders. The price action has also underscored the importance of the $3.5K resistance zone, which remains a critical barrier for any sustained recovery. Until Ethereum can reclaim this level, the short to medium-term outlook is likely to remain bearish.
Conclusion
Ethereum’s recent price action has been a rollercoaster, marked by a sharp rejection at $3.5K, a dramatic 38% drop, and a partial recovery. The massive wipeout of Open Interest, coupled with bearish on-chain metrics like the Taker Buy-Sell Ratio and Exchange Netflows, highlights the challenges facing Ethereum in the current market environment. Dormant circulation spikes and a plateau in Mean Coin Age further reflect the uncertainty among long-term investors.
While slight exchange outflows and Mean Coin Age trends offer faint signs of accumulation, they are not enough to counteract the prevailing bearish sentiment. The $3.5K resistance remains a critical level for Ethereum, and until it is decisively breached, the market is likely to remain under pressure. For now, traders and investors must navigate a landscape defined by heightened fear, selling pressure, and cautious optimism.
