Ethereum Price Wobbles Under $500M ETF Outflows, and US Fed Rate Pause

Ethereum Price Analysis:

Ethereum’s price came close to losing the $3,100 support on August 1, 2024, as markets reacted to outflows from ETH ETFs and the recent US Fed rate pause, technical indicators suggest a reverse toward $3,000 could be on the cards.

Ethereum Price Hit $3,100 after US Fed Rate Pause 

This week, Ethereum’s price forfeited the gains accrued from the enthusiasm surrounding the spot ETH ETF launch on July 22. After a promising first week of trading the ETFs have recorded persistent outflows this week.

More so, the Ethereum’s adverse price action was further accelerated by the shift in US macroeconomic environment.

On July 31, the U.S. Federal Reserve opted to hold federal funds rate unchanged within the range of 5.25% to 5.5%.

While the Fed also hinted at a possible Rate cut in September, the current hawkish decision has sparked bearish reactions across various risk asset markets, including equities and the  cryptocurrencies sector, which was evident on Thursday.

Following dovish signals from the latest Non-Farm Payrolls (NFP) and Consumer Price Index (CPI) reports released on July 5, investors had anticipated the Fed might introduce its first rate cut on July 31.

However, the rate hold prompted bearish sentiment across financial markets, significantly affecting Ethereum.

Ethereum’s price dropped to approximately $3,100 by midday (Eastern Time) on August 1. This decline represents a 15% decrease from the weekly high of $3,396 recorded on Monday, July 29.

Meanwhile, the global altcoin market only dropped by 9.9% during the same period. This discrepancy confirms that Ethereum has underperformed relative to the broader market this week.

ETFs Offloaded 165k ETH in 5 Days

When an asset as influential as Ethereum underperforms the market, it often indicates internal bearish factors within the ecosystem.

Within the last 5 days of trading from July 24 to July 29, Ethereum ETFs experienced aggregate outflows of 165,000 ETH. Although the trend flipped on July 30, when the brought in 10,160 this still leaves the ETH etfs with a negative netflow of 155,000 ETH over the past week.

At current prices, these outflows account for more than $500 million, which the cumulative market cap of the 9 newly-launched Ethereum ETFs to $9.5 billion at the time of publication on Aug 1.

While outflows are fairly common for most spot ETFs, a lack of demand leading to consecutive days of significant outflows often triggers a bearish market reaction. Especially, when coupled with macroeconomic bearish catalysts such as the hawkish Fed rate pause decision announced on July 31.

Evidently, this explains why Ethereum price has performed significantly below the market average since the turn of the week. If Ethereum ETFs outflow streak persist in the first week August 2024,  ETH price risks tumbling toward the vital $3,000 territory.

Ethereum Price Analysis: $3,000 Retest Incoming ?

Ethereum’s recent price movements suggest a potential bearish continuation despite previous attempts at recovery. The price encountered significant resistance at $3,561.50, which aligns with the upper boundary of the Donchian Channel. This resistance level has led to a sharp pullback, with Ethereum currently trading at $3,106.47, a decrease of 3.87% in the August 1 session.

The Donchian Channel indicates that the immediate support level is at $3,087.67, with the middle line providing a secondary resistance at $3,324.59.

If Ethereum fails to hold the $3,087.67 support, the price could retest the critical psychological level of $3,000. A decisive break below this level would likely accelerate the bearish trend, potentially driving the price towards the next support at $2,800.

The True Strength Index (TSI) further supports the bearish outlook. The TSI reading is -6.0744, with the signal line at -2.0253, indicating that the momentum is firmly in the negative territory. The widening gap between the TSI and the signal line suggests that the bearish momentum could continue to strengthen in the near term.

In conclusion, the technical indicators point to a bearish outlook for Ethereum, with the potential for further declines if the price fails to maintain support at $3,087.67.

Investors should closely monitor the $3,000 level, as a break below it could signal a deeper correction towards $2,800.