Ethereum ETF Inflows and Low CPI May Fuel ETH Rally Despite Crypto Market Challenges
Ethereum (ETH) experienced a 1.7% decline on Wednesday amidst lower Consumer Price Index (CPI) inflation data and increasing inflows into ETH ETFs, hinting at a potential rally on the horizon. Despite these positive indicators, a crucial trendline suggests that ETH might undergo a consolidation phase before embarking on a new upward trajectory.
The US Consumer Price Index (CPI) fell to 2.9% year-over-year, below the anticipated 3.0%, as reported by the Bureau of Labor Statistics (BLS). This decline led to a heightened likelihood of the Federal Reserve (Fed) implementing a 25 basis points interest rate cut, with the probability rising to 56.5% on the Chicago Mercantile Exchange (CME).
ETH could witness a resurgence in the coming weeks, supported by the trend of risk assets like cryptocurrencies thriving in a lower interest rate environment. Ethereum ETFs saw net inflows of $24.3 million on Tuesday, marking the second consecutive day of positive flows for these investment products.
Among the notable ETF movements, BlackRock ETHA received net inflows of $49.1 million, totaling $950.2 million since its inception. Fidelity FETH recorded inflows of $5.4 million, while Grayscale ETHE experienced outflows of $31 million, extending its cumulative outflows to $2.32 billion.
Market sentiment within the crypto community suggests that Ethereum may rally further if the Fed proceeds with rate cuts and ETH ETF inflows continue to grow. Conversely, Jump Trading appears to be resuming its potential ETH selling spree, having retrieved 17,049 ETH valued at $46.44 million from the staking protocol Lido Finance. Jump Trading still holds ETH worth $148 million across Lido Finance and another wallet, following a reported dump of over $400 million in ETH on August 2.
Technically, Ethereum is trading at approximately $2,660, with a 1.7% decline for the day. Over the past 24 hours, ETH witnessed liquidations exceeding $46.27 million, with long and short liquidations amounting to $29.44 million and $16.83 million, respectively.
ETH’s attempt to breach the descending trendline originating from May 27 faced rejection near the $2,799 resistance level. This rejection reinforces the short-term bearish outlook, suggesting a potential decline towards the $2,000-$2,100 range. Historical patterns indicate that ETH might struggle to surpass the trendline resistance until September.
A successful breakthrough could propel ETH into a fresh rally, aligning with a three-year bullish triangle that commenced in late 2021. However, resistance looms around the 100-day and 200-day Simple Moving Averages (SMAs) post a “Death Cross” on August 8, signaling a bearish divergence. The Relative Strength Index indicates a slight bearish bias, with a potential downside target of $2,621, coinciding with a $38.33 million liquidation wall.
In conclusion, Ethereum’s price movements reflect a delicate balance between technical indicators, market sentiment, and macroeconomic factors, setting the stage for potential volatility and strategic trading opportunities in the near term.
