Is Ethereum’s (ETH) Price Slump Coming to an End? On-Chain Data Offers Clues

TLDR

• Ethereum’s price has dropped below $3,000 since early August, currently trading around $2,679.
• Ethereum gas fees hit a record low of 1.06 Gwei on Saturday, leading to less ETH being burned.
• Ethereum’s total supply has been consistently rising since April 2024.
• Global Ethereum ETFs saw minor inflows of $4.2 million last week, while US ETFs had $14.1 million in outflows.
• Some on-chain metrics suggest Ethereum’s price correction may be nearing its end.

Ethereum, the second-largest cryptocurrency by market cap, has been struggling in recent weeks.

Since early August, Ethereum’s price has fallen below the key $3,000 level, currently trading at $2,679 according to CoinMarketCap data. This represents a 23.57% decrease since July 23.

Ethereum gas fees reached a record low of 1.06 Gwei on Saturday, as reported by Ultrasound.money. Gas fees are the transaction costs on the Ethereum network, measured in Gwei. This dramatic in fees has been attributed to rising activity on layer 2 protocols and the recent Dencun upgrade implemented in March.

While lower transaction costs benefit network users, they have implications for Ethereum’s tokenomics. The reduction in gas fees has led to less ETH being burned, resulting in an increase in the total supply of Ethereum tokens.

Data from CryptoQuant shows that between April and August 2024, Ethereum’s total supply has risen by over 220,000 ETH.

This supply increase occurs against the backdrop of the launch of spot Ethereum ETFs on July 23. Contrary to some expectations, the ETF launch has not provided a significant boost to Ethereum’s price. In fact, US-based Ethereum ETFs have recorded cumulative net outflows of $434 million since their debut, creating additional selling pressure on the asset.

Global Ethereum ETFs paint a slightly different picture, with CoinShares data showing minor inflows of $4.2 million last week. However, US spot ETH ETFs specifically saw net outflows of $14.1 million during the same period. These figures suggest a cautious approach from investors, reflected in Ethereum’s choppy price movement and a Fear and Greed Index reading of 34, indicating fear in the market.

Some metrics suggest that Ethereum’s price correction may be nearing its end.

CryptoQuant author Burak Kesmeci points to two on-chain indicators: the Taker Buy Sell ratio and Open Interest (OI). The taker-buy ratio, which calculates the ratio of buyers to sellers across major cryptocurrency exchanges, has turned “positive again” according to Kesmeci.

Open Interest, representing the total number of outstanding options contracts, stands at $10.69 billion as of August 19, up approximately 10% from the previous day. Kesmeci suggests that for a significant upward price movement, “leveraged players will need to return to the scene.”

However, not all indicators are bullish. The formation of a death cross pattern on Ethereum’s price chart, where the 20-day EMA crossed below the 200-day EMA, signals accumulating bearish sentiment. Additionally, Ethereum is currently trading below all key moving averages, further reinforcing the bearish grip on the market.

In the derivatives market, funding rates have turned negative, indicating that short positions are currently dominant. This bearish sentiment is reflected in recent liquidations, with Ethereum seeing $30.8 million in liquidations over the past 24 hours, $28 million of which were long positions.

Looking ahead, the cryptocurrency market, including Ethereum, remains sensitive to macroeconomic factors.

Investors are closely watching for signals from the Federal Reserve regarding potential interest rate cuts. The upcoming release of FOMC meeting minutes on August 24 and Federal Reserve Chair Jerome Powell’s speech at the Jackson Hole Symposium on August 21 are expected to provide further insights into the US economic outlook and monetary policy direction.