Ethereum (ETH) Faces Steepest Decline Since FTX Collapse, Exchange Flows Suggest Possible Rebound

• Ethereum [ETH] has experienced significant volatility over the past week, marking its sharpest decline since the aftermath of the FTX collapse.
• Liquidations, particularly leveraged ones, have played a crucial role in ETH’s recent price performance.
• ETH plummeted by 36.59% consecutively over the last seven days, erasing the bullish sentiment that had started to build at the end of July.

Ethereum faced its most severe weekly drop since the FTX crisis, potentially influenced by leveraged liquidations, with important exchange flow data indicating both significant outflows and inflows.

ETH Experiences Sharp Decline Amidst Volatility

Throughout July, Ethereum displayed a bullish trend, though slight pullbacks were observed in the final week of the month. This positive momentum was short-lived, as the following week brought a surge of sell pressure, leading to a substantial 36.59% decline in ETH’s value over seven consecutive days. This sharp downturn marks the steepest drop since ETH’s decline during the FTX collapse in June 2022.

Potential Recovery Indicators for ETH

Despite the bearish trend, several indicators suggest a potential recovery for ETH. The Relative Strength Index (RSI) shows that ETH’s price has become extremely oversold, an environment that often precedes a rebound. Additionally, the recent pullback saw ETH retest a significant ascending support level, resulting in a minor 5% bounce back. This accumulation phase could hint at impending upward momentum.

Analyzing Ethereum’s Exchange Flows

Exchange data has revealed notable activity in recent days. Over 501,000 ETH was transferred out of exchanges within 24 hours, marking the highest single-day outflow in the past 30 days. In contrast, 446,877 ETH flowed into exchanges during the same period, also the highest inflow in the last month. This disparity resulted in roughly $119 million more in outflows than inflows, which might indicate a growing demand for ETH at lower prices.

Impact of Leveraged Liquidations on ETH’s Price

Derivatives data indicated a peak in long liquidations, totaling $141.2 million in the last 24 hours, the highest daily amount within the last month. Short liquidations, however, were considerably lower at $35.5 million. The spike in margin calls for leveraged long positions likely contributed to the significant downside and increased volatility. As many leveraged positions got liquidated, the market might now see reduced volatility.

Market Outlook and External Factors

Moving forward, the market’s direction for ETH will likely depend on external factors. While the recent deleveraging might stabilize volatility, the balance between strong demand and continued sell pressure will determine future price movements. Investors should stay informed about broader market conditions that could impact ETH’s performance.

Conclusion

Ethereum’s recent performance has been marked by extreme volatility, resulting in its most significant weekly drop since the FTX days. While various indicators suggest a potential rebound, including exchange flow data and RSI levels, the role of leveraged liquidations and external market factors will be critical in shaping ETH’s future trajectory. Investors are advised to monitor these developments to make informed decisions.