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Ethereum on-chain activity reveals mixed signals amid declining inflation

fxstreet.com 12 July 2024 02:10, UTC

Ethereum could rally in Q3 following reduced US inflation and launch of spot $ETH ETFs.
Ethereum's on-chain activity shows mixed sentiment among investors.
Bearish exhaustion candle could signify a downturn for $ETH if SEC delays $ETH ETF approval.

Ethereum ($ETH) is up 0.5% on Thursday following cooling inflation reports in the US. However, mixed on-chain sentiment signals uncertainty among investors despite the potential launch of spot $ETH ETFs.

Daily digest market movers: CPI data, mixed on-chain signals, increasing supply

Ethereum's price is expected to react positively in the coming days to the recent decline in the US Consumer Price Index (CPI), a metric for measuring the cost of goods and services. The CPI for June declined by 0.1% from May, beating market expectations and reaching a three-year low. As a result, many expect the Federal Reserve (Fed) to cut rates in September.

Combined with the potential launch of spot $ETH ETFs in the coming days, many expect Ethereum to have a positive Q3. This also aligns with predictions from JP Morgan analysts that the crypto market will rebound in August.

Also, on-chain activity shows that Ethereum has been facing a flurry of exchange deposits and withdrawals in the past 24 hours, according to data from Lookonchain. This shows mixed sentiment and uncertainty among $ETH investors. As some are de-risking, others are accumulating their selling pressure, keeping the price of $ETH in a somewhat horizontal trend.

The key transactions include Golem pausing its $ETH selling spree after staking 40,000 $ETH, a whale depositing 10,000 $ETH into Binance, another withdrawing 16,074 $ETH in the past week, and HTX founder Justin Sun increasing his $ETH holdings.

Meanwhile, despite increasing staking deposits, $ETH's supply has started trending upwards since the Ethereum Dencun upgrade in March. As the chart from Bitwise below shows, $ETH's supply trended downward to -450K between The Merge and Q1 '24. It started moving upwards in Q2'24 following the Dencun upgrade. If $ETH continues on this path, it will lose its deflationary status.

$ETH Supply change since The Merge

$ETH technical analysis: Ethereum posts bearish exhaustion candle

Ethereum is trading around $3,125 on Thursday, up 0.5% on the day. $ETH has seen $26.27 million in liquidations in the past 24 hours, with long and short liquidations accounting for $17.05 million and $9.23 million, respectively.

While the market remains gloomy, $ETH is taking a slow ride up, offsetting its weekly losses as the market anticipates the launch of spot $ETH ETFs.

However, $ETH posted a bearish exhaustion candle on the 8-hour time frame after attempting to sustain a move above the $3,200 price. An exhaustion candle has a long wick 2-3 times the length of its body and little or no wick on the other side. If a bearish exhaustion candle appears during an uptrend, it indicates bulls may be losing momentum, and vice versa if a bullish exhaustion candle appears during a downtrend.

$ETH/$USDT 8-hour chart

In the case of $ETH, the reversal suggests that some of the over 2 million addresses that purchased $ETH around $3,200 sold as they broke even, according to earlier predictions.

While it seems $ETH may tilt toward the downside after the bearish exhaustion candle, optimism from lower-than-expected CPI data and the Securities & Exchange Commission (SEC) approving issuers' $ETH ETF S-1 drafts may see it attempt another move above the $3,200 price level. The move up may see $3.73 million worth of shorts being liquidated around the $3,222 price level.

However, if the SEC continues delaying approval of $ETH ETF, Ethereum will likely fall back to the $2,900 to $3,000 price level.

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