Ethereum Price Analysis: Understanding the Recent ETH Price Decline After ETF Launch
Ethereum (ETH) witnessed a 1.8% decline on Wednesday, despite the successful introduction of ETH ETFs that amassed $10.2 billion in assets and attracted net inflows of $107 million. The second-largest cryptocurrency by market cap is encountering challenges as it breaches crucial support levels. The pressing question now is whether Ethereum is on track to revisit the pivotal $3,000 support level by the end of July.
Historically, following the launch of Ethereum ETFs, there tends to be a dissipation of initial excitement, leading to what is commonly referred to as a “sell-the-news” scenario. This trend has been observed during comparable events in December 2017, April 2021, October 2021, January 2024, and most recently in July 2024. This pattern typically indicates that after the initial hype of the launch subsides, a market correction ensues.
The timing of the ETF launch has been pinpointed as a contributing factor to the current sell pressure on Ethereum. The coinciding distribution of Bitcoin from Mt. Gox has added to the selling pressure in the crypto market. Additionally, the commencement of the US tech earnings season has been lackluster, with notable sell-offs from companies like Alphabet and Tesla. With 40% of the market capitalization set to report in the upcoming week, a cautious outlook due to weakened consumer spending could further impact the market.
Under the prevailing market conditions, Ethereum appears particularly susceptible. Its fundamentals, such as new user growth and revenue, have stagnated. Prior to the ETF launch, 10X Research identified Ethereum as overbought, indicating it was primed for a short trade—a sentiment reinforced by a 6% decline post-report.
Currently, Ethereum is trading around $3,420, marking a 1.8% decrease for the day. Coinglass data reports $14.15 million in 24-hour liquidations, with a prevailing bearish sentiment evident through the ETH Long/Short Ratio dropping to 0.91. Analogous to Bitcoin’s post-launch behavior, Ethereum may undergo a brief downturn before a potential recovery. The RSI level is currently below the midline, suggesting that bears hold sway over the present trend.
Technical indicators hint at a probable decline towards the $3,203 support level before a potential ascent to the $3,731 resistance level.
Looking ahead, Ethereum could test resistance at $3,400 if market momentum picks up, with a potential target of $3,730 in the ensuing weeks. Conversely, should bearish trends persist, Ethereum might retreat towards its critical support level of $3,000 by the end of the month.
Analysts recommend buying Bitcoin and selling Ether for ETH traders. Selling Ether options to fund Bitcoin options is advised to capitalize on Bitcoin’s potential surge while safeguarding against Ether’s volatility.
