Ethereum Market Update: ETFs Underperform as Exchange Reserves Rise

Ethereum (ETH), the second-largest cryptocurrency by market capitalization, is experiencing mixed signals in the market as we approach the end of Q3 2024. Despite a modest 1% increase on Tuesday, Ethereum-based exchange-traded funds (ETFs) continue to underperform, marking their fifth consecutive day of outflows.

Ethereum ETF Underperformance and Historical Q3 Weakness

Ethereum ETFs extended their negative flow streak, with $5.2 million in outflows reported on Monday. Grayscale’s ETHE led the exodus, shedding $22.6 million and bringing its total asset loss to $2.69 billion since the launch of ETH ETFs. While Fidelity’s FETH and Grayscale Mini Ethereum Trust managed to secure inflows of $7.6 million and $8 million respectively, the overall trend remains concerning for investors.

Analysts suggest that the weak performance of spot ETH ETFs may be attributed to the historical decline across risk assets typically observed in Q3. This pattern has led to recommendations that a more accurate analysis of ETH ETF performance should be reserved for after Q3 concludes.

Rising Exchange Reserves Signal Potential Selling Pressure

Adding to the complex market dynamics, Ethereum’s exchange reserve has seen a significant uptick, increasing by over 94,000 ETH (approximately $220 million) in the past 24 hours. This surge in exchange reserves often indicates higher selling pressure, which could lead to price declines in the near term.

Open Interest and Future Rally Potential

For Ethereum to stage a significant rally, experts note that the cryptocurrency’s futures open interest (OI) needs to rise. The current OI of $10.51 billion represents a 38% decline from its all-time high of $17.09 billion recorded on May 28. This decrease in OI has coincided with a 39% drop in ETH’s price over the same period.

ETH/USD Technical Analysis and Price Movements

Ethereum is currently trading around $2,360, facing resistance at the $3,400 level and a descending trendline extending from May to September. To initiate a substantial rally, ETH needs to overcome these barriers and potentially target the $2,817 and $3,230 resistance levels.

The Relative Strength Index (RSI) at 53 indicates bullish momentum, while the Stochastic Oscillator suggests a potential brief price correction. In the short term, analysts warn that ETH could experience a decline to $2,318, which could trigger liquidations worth $28.33 million.