Main Points:
- Ethereum dropped from a peak of $2,768 and faces potential bearish movement.
- The Coinbase Premium Index signals increased sell pressure.
- Ethereum supply on exchanges is growing, suggesting selling intentions.
- Total Value Locked (TVL) on Ethereum has declined, lagging behind other Layer-1 protocols.
- Ethereum’s network fees remain high, deterring new projects.
- Bearish technical patterns suggest further declines, possibly toward $2,300.
Ethereum’s Decline After Reaching $2,768: A Bearish Outlook
On October 21, Ethereum (ETH) hit a price of $2,768 but soon encountered resistance, leading to a decline in its upward momentum. Several factors have contributed to this pullback, including an increase in ETH supply on exchanges, lower network activity, and technical indicators pointing to a bearish trend. This suggests that Ethereum may continue to face downward pressure in the near future.
Sell Pressure Indicated by the Coinbase Premium Index
The Ethereum Coinbase Premium Index, which measures the price difference of ETH between Coinbase Pro and Binance, has fallen below the 14-day simple moving average (SMA). This drop indicates a higher likelihood of sell pressure from U.S. investors compared to the global market. Currently, the index sits at -0.075, below the 14-day SMA of -0.040, pointing to a significant increase in U.S. selling pressure that could drive the price lower.
Increased ETH Supply on Exchanges: A Bearish Signal
Another indication of a bearish sentiment is the rising supply of Ethereum on centralized exchanges. As of October 21, the amount of ETH on exchanges reached 15.8 million, the highest level in four weeks. A surge in ETH inflows into exchange wallets suggests that investors are moving their tokens from self-custody to exchanges, possibly in preparation for selling.
This increase in ETH reserves on exchanges could lead to additional selling pressure, reinforcing the bearish outlook for Ethereum in the short term.
Declining Total Value Locked (TVL) on Ethereum
Ethereum’s total value locked (TVL), which represents the total amount of assets locked in its decentralized finance (DeFi) protocols, has been decreasing since mid-June. After reaching a peak of $66 billion on June 3, Ethereum’s TVL dropped by 57% to $42.3 billion by August 5 and has since recovered slightly to $48 billion.
Despite this rebound, Ethereum’s TVL performance has been underwhelming compared to other major Layer-1 blockchains. For example, Solana has seen a 22% increase in TVL over the past month, while Ethereum’s TVL decreased by more than 2%. This decline reflects a waning interest from traders in Ethereum’s DeFi ecosystem, possibly due to its relatively high transaction fees.
Ethereum’s High Fees as a Barrier to New Projects
Ethereum’s consistently high transaction fees have deterred many users, especially those looking to launch new projects. According to Etherscan, the average transaction fee on Ethereum is 11.492 gwei, or roughly $0.62. This is significantly higher than the average fee on Solana, which is approximately $0.015. These high costs make Ethereum less attractive for new projects and users, further contributing to its recent struggles.
Bearish Technical Pattern Points to Further Declines
From a technical perspective, Ethereum’s price action between October 10 and October 23 has formed an inverse V-shaped pattern on the daily chart. After surging 19% from $2,327 to $2,800, Ethereum met strong resistance at this psychological level, triggering a swift correction.
As a result, traders who had bought during the rise have begun locking in profits, leading to further downward pressure. If this inverse V-shaped pattern completes, Ethereum could potentially drop another 9.7%, bringing its price down to the pattern’s neckline near $2,300.
In addition, the Relative Strength Index (RSI) has fallen from 67 to 52 over the past three days, indicating that market sentiment has turned bearish. If the downward trend continues, Ethereum may test key support levels at the 200-day exponential moving average (EMA) at $2,660, followed by the recent high of $2,768.
Summary and Outlook
In summary, Ethereum is currently facing multiple bearish factors, including increased sell pressure from U.S. investors, growing ETH supply on exchanges, declining TVL, and high network fees. These factors have combined to create a challenging environment for Ethereum, and technical indicators suggest that the price could drop further, potentially reaching $2,300 in the near future.
However, if Ethereum manages to regain upward momentum, key resistance levels to watch include $2,660 and $2,768. Investors should remain cautious and conduct thorough research before making any trading decisions, as market conditions remain volatile.
