Key Points
- The Federal Reserve’s withdrawal of $161 billion from the market could impact Ethereum’s price and ETFs.
- An ancient Ethereum whale has been quietly selling off significant amounts of ETH.
Despite facing recent challenges that have affected the wider crypto sector, Ethereum [ETH] continues to be a significant player in the cryptocurrency market.
The Federal Reserve’s actions are under close watch by analysts as the Fed has pulled $161 billion from the markets. This was evidenced by the increase in the Treasury General Account from $714 billion to $875 billion, subsequent to corporate tax payments.
The Fed’s ongoing liquidation of positions in risk-on assets has had an impact on market liquidity. It’s expected that the Reverse Repo program will start to reduce liquidity this week and continue until the end of September.
Effects of Liquidity Squeeze on Ethereum
The price action of Ethereum is heavily influenced by the Federal Reserve’s liquidity measures, especially for the ETH/USDT pair. Currently trading at $2,298, ETH has been on a downward trend since March 2024, with significant price fluctuations occurring in August.
ETH managed to break out of a descending trend channel and is now hovering around the $2,300 level. If ETH can maintain above this crucial price zone, it may evade the negative impacts of the Fed’s liquidity reduction and could even see a price reversal.
However, if ETH falls below $2,300 and remains there, the liquidity squeeze could drive prices lower. The Chaikin Money Flow (CMF) indicator currently shows a value of 0.09, suggesting accumulation and buying pressure. The Relative Strength Index (RSI) has also crossed above its 14-day moving average, indicating potential bullish momentum.
Despite these technical indicators suggesting a possible price recovery, the liquidity crunch could still push ETH lower before any upward movement. Ethereum-based ETFs have witnessed significant outflows, even as Ethereum spot ETFs were launched, allowing funds to flow into ETH assets.
Ethereum Whale Selling Activity
A long-standing Ethereum whale has been quietly selling off substantial amounts of ETH recently. The whale sold 2,364 ETH, totaling $5.44 million USDT at an average price of $2,302, spread across 27 transactions. Despite this recent sell-off, the whale still holds 14,272 WETH, valued at approximately $33 million.
The whale’s selling activity may be due to the bearish sentiment driven by the Fed’s liquidity reduction. However, the selling might slow if market conditions improve.
Ethereum’s price could face further declines due to the Fed’s liquidity squeeze, but technical indicators suggest potential for a reversal. However, ETH ETFs and whale activity signal caution, and the market may need more liquidity to support higher prices.
