Key Points
- Ethereum’s trading volume and investor interest have dropped despite recent price surge.
- Ethereum’s price might face a 2% to 7% drop in the coming weeks.
Despite a recent surge in price, Ethereum (ETH)‘s metrics indicate a potential cause for concern among bulls.
Ethereum’s Rally and Subsequent Drop
On 20th May, Ethereum managed to surpass a crucial resistance zone at $3.1k. This surge occurred shortly after the approval of a spot Ethereum ETF was announced, with the official approval coming on 23rd May.
However, since this surge, Ethereum’s trading volume has dropped to earlier May levels. The NFT market has also seen a significant decrease in activity. Furthermore, interest from U.S. investors has also dipped.
Indicators of Shrinking Demand
The Ethereum Coinbase Premium Index, which measures the percent difference between the Coinbase ETH/USD pair and the ETH/USDT pair on Binance, reached its lowest point in 2024. This index is seen as a reliable indicator of U.S. investor interest as they have access to Coinbase but not Binance.
In August 2023, the premium saw a sharp fall, followed by a price drop of Ethereum from $1.8k to $1.6k. While this index does not predict every price drop, a decline in this metric is a strong indicator of diminishing demand.
Data from Hyblock revealed that the cumulative liquidation levels delta was firmly negative. This suggests that short positions are outweighing long ones, indicating that to trigger the liquidations of many of these bears, prices might have to jump higher.
The long-term trend for Ethereum is upward based on the Fibonacci retracement levels. However, a recent inability to clear a lower high from April suggests a lack of consistent demand during its recent rally, reinforcing the likelihood of a price drop towards $3.6k in the near future.
