Ethereum (ETH) has recently experienced a significant drop in value after a sudden surge in selling pressure eroded the gains it had made at the beginning of January.
Various factors contributed to this selling pressure, including a shakeout in leveraged positions and outflows of spot trades, among other reasons.
One of the most significant indicators of sell pressure on ETH was the outflows from spot ETFs. The week started with inflows of $128.7 million on January 6, following previous inflows on January 3.
This positive momentum may have led to a false sense of security, prompting a fear, uncertainty, and doubt (FUD) driven sell-off after the ETF scenario shifted on January 7.
On the contrary, Bitcoin ETFs remained in positive territory over the past 24 hours, showcasing a different market sentiment compared to ETH. This divergence reflected the current dominance dynamics.
ETH faced total ETF outflows of $86.8 million on January 7, aligning with the negative spot flows observed across exchanges during the same period, reaching a peak outflow of $235.66 million on that day.
ETH Dominance Declines, Poised for a Potential Turnaround
The recent selling pressure has pushed down ETH dominance, which had surged to 12.87% over the weekend before dropping to 12.32% amid recent events.
There is a possibility for ETH to reclaim higher dominance levels from its current position, as the previous zone has exhibited supportive characteristics.
This level of support for ETH dominance also correlates with the price action support retest on Ethereum. The question remains: Is the recent pullback complete, or could prices experience a further decline?
The recent wave of selling pressure observed in the past two days was likely fueled by the liquidation of leveraged long positions.
Interest in leveraging positions has escalated in recent months, with long liquidations surging by more than 700% since January 3.
In the last 24 hours, liquidations exceeding $173 million were recorded, indicating that the rally witnessed in early January may have set the stage for a leverage shakeout.
Can ETH make a recovery in the latter part of the week? There is a possibility, given a key observation that could provide insights into the future direction: Whale activity since the beginning of the year.
Recent data suggests that despite selling initially, whales have been accumulating ETH during the recent downturn.
On January 7 alone, ETH whales acquired 519,620 ETH, while outflows totaled 411,300 ETH on the same day. This accumulation trend among whales indicates their potential to support a mid-week rebound.