Ethereum [ETH] experienced a rejection near the $3.5k resistance level. Recent market turmoil led to a significant 38% decline in Ethereum’s price, dropping to $2,125 before witnessing a rebound to $2,921 shortly after.
This sudden drop resulted in a substantial reduction in Open Interest (OI), with the entire market witnessing liquidations amounting to an estimated $8 billion to $10 billion.
Following the wipeout, ETH’s OI retreated to levels seen in mid-November. Unfortunately, the price was notably lower, down approximately 12% compared to November.
Should Ethereum Bulls Consider Increasing Positions or Remain Cautious?
On-chain metrics are signaling caution. The taker buy-sell ratio, which indicates the volume ratio between buyers and sellers of market orders (as opposed to limit orders) in perpetual swaps, reflects a dominance of sellers, suggesting increased fear in the market.
Moreover, this metric has remained negative for the majority of the last three months. Ethereum’s price action has struggled to maintain a robust uptrend, unlike Bitcoin [BTC] or some of the other major altcoins.
Positive Exchange Netflows were observed while ETH was on the rise in November. However, these positive netflows turned negative during the recent price decline, signifying a potential increase in selling pressure.
Over the past few days, the 7-day Moving Average (MA) entered negative territory, indicating minor outflows and hints of accumulation.
There was a notable spike in dormant circulation during the retesting of the $3.5k resistance on January 31st, coinciding with significant losses in the U.S. markets, particularly tech stocks.
The Funding Rate has also been negative in recent days. Concurrently, the Mean Coin Age (2 year) has stagnated over the last couple of weeks, following an upward trend since late December, resembling a pattern observed in September.
Hence, the short-to-medium-term sentiment appears bearish. The price action underscores the significance of the $3.5k resistance level.
Nevertheless, the Mean Coin Age and the slightly negative outflows provide some modest signs of optimism for bulls.