Throughout the last three weeks, Ethereum [ETH] has faced challenges in sustaining an upward trend. During this period, the digital currency has remained within a range of consolidation between $3.2k and $3.5k.
The prolonged consolidation has raised concerns among analysts regarding the future direction of ETH. Notably, Fost, an analyst at CryptoQuant, has pointed out that Ethereum is encountering significant pressure.
Is Ethereum Experiencing Pressure?
As per CryptoQuant’s analysis, Ethereum is confronting elevated FUD and bearish sentiment, leading to the ongoing underperformance of the altcoin.
To begin with, the netflow of Ethereum on Binance shows a predominance of inflows since September 2024. During this period, there were six days with inflows exceeding 100k ETH, in contrast to just one day with equivalent outflows.
Moreover, Ethereum’s reserve on Binance has witnessed a notable increase from 3.6 million ETH in September to 4.3 million ETH presently, with a peak exceeding 4.5 million ETH, indicating an addition of almost 1 million ETH within a month.
Lastly, between September and December 2024, there was a rise in Ethereum’s Open Interest (OI), bolstering the uptrend of ETH as long positions dominated the market.
However, since December, there has been a decline in OI, as the 7 EMA crossed below the 50 EMA, signifying a bearish crossover.
Consequently, this data suggests that Ethereum is undergoing a bearish phase, prompting investors to adopt a cautious approach by selling when ETH records marginal gains.
Interpretation of Ethereum’s Charts
Evidently, Ethereum is currently under immense pressure with bears having a strong grip on the market. Nevertheless, in the short run, there are indications of a possible reversal in ETH’s favor.
According to CryptoCrypto’s analysis, Ethereum is witnessing a short-term demand that could set the stage for some positive movements.
For instance, Ethereum’s Coinbase Premium Index has turned positive after dropping to its lowest level in three weeks, indicating rising demand from U.S. investors and institutions. Consequently, traders in the U.S. are optimistic, expecting prices to surge shortly.
Additionally, Ethereum’s Taker Buy-Sell Ratio has surged to surpass 1 for the first time this week, with a reading of 1.05, highlighting strong buying pressure, indicating that buyers currently outnumber sellers.
Moreover, there has been an upsurge in Ethereum’s scarcity, as evidenced by a spike in the stock-to-flow ratio, rising from 3.2 to 56. This surge suggests increased accumulation as investors store their ETH off exchanges, leading to reduced supply, potentially boosting prices should the demand remain constant or increase.
Future Prospects for Ethereum
In summary, despite Ethereum grappling with considerable pressure, the recent market conditions hint at a potential short-term recovery within the past 24 hours.
The present market scenario points towards a probable breakout from the current consolidation band.
In the short term, if buyers sustain the observed momentum from the previous day, Ethereum could reclaim $3,500 and attempt to breach the $3,700 resistance level. For this bullish scenario to materialize, ETH must regain and maintain levels above $3,500.
In case the recent buying activity fails to stimulate the market, Ethereum might experience a decline towards $3,240, with a further drop to $3,000 looming as a possibility.