Is Ethereum Finally Bottoming Out After ETH Price’s 40% Drop?

Ethereum’s native token, Ether (ETH), has jumped by 35% after crashing to around $2,110 on Aug. 5, its lowest level in seven months. Still, the second-largest cryptocurrency is trading almost 40% lower than its local high of around $4,000, established in March 2024.

This volatile price action shows that Ether bulls are not exactly out of the woods yet. However, various indicators, including on-chain data, offer insights into whether the cryptocurrency is nearing a bottom and if current price levels present a buying opportunity.

Ethereum On-Chain Analysis: Spot Exchanges Witness Outflows

Ether’s price rebound following the Aug. 5 market crash has accompanied fund outflows from all spot exchanges, according to data gathered by CryptoQuant.

Barring two days or minor inflows, crypto exchanges have witnessed withdrawals for most of the day since Aug. 5, indicating that numerous traders preferred to hold their Ether than trade for other assets, including fiat.

Investors from the United States are particularly interested in buying the Ether’s dip, according to the Coinbase Premium Index. This index tracks the percentage difference between Coinbase Pro price (USD pair) and Binance price (USDT pair) under the assumption that a high premium value means a higher institutional interest in the underlying cryptocurrency.

Since the Aug. 5 dip, Ether has been trading at a premium on Coinbase versus Binance, suggesting that hedge funds, family offices, and other professional trading firms are supporting the cryptocurrency’s recovery.

That highly contrasts the sentiment among retail investors, as tracked by the declining Korea Premium Index since the Aug. 4 dip.

For the uninitiated, this index reflects the price gap between South Korean exchanges and other exchanges, with high premium values indicating strong buying pressure from Korean retail investors.

Looking at these indexes together, it appears Ethereum’s retail investors are selling their Ether holdings to institutions. But this analogy requires further confirmation from the data tracking ETH’s supply distribution.

For instance, the number of addresses holding a balance of over 100 ETH (fishes) has declined during and after the Aug. 5 crash.

Interestingly, the decline aligns with a rise in the balance held by entities with over 1,000 ETH (whales) has increased simultaneously.

This data supports the outcomes from the Coinbase and Korea premium indexes. In other words, retail has sold ETH to institutions during the recent price dip—a potential sign that Ethereum is bottoming out.

Ethereum ETF Net Flows Are Weaker, Though

Grayscale Ethereum Trust (ETHE) is single-handedly pushing the Ether exchange-traded fund (ETF) net flow data into negative territory. Since their launch on July 28 with a seed capital of $10.25 billion, these U.S. ETFs have witnessed $406 million in outflows, with ETHE amounting to $2.38 billion in withdrawals alone.

The ETHE outflows are primarily due to its relatively higher fee of 2.50% compared to other ETFs, whose fees are within the 0.15-0.25% range. As a result, other ETFs have witnessed inflows since launch.

Taking Grayscale Ethereum Trust out of the equation literally pushes the overall Ethereum ETF net flows into positive territory.

Nonetheless, as of Aug. 16, ETHE had relieved nearly 30% of its total Ether reserves, suggesting more outflows will likely occur in the coming days. This may limit Ether’s upside bias in the spot market, if not cause an outright crash.

What Do Ethereum Technical Indicators Show?

From a technical perspective, Ethereum bulls and bears are at an impasse following its Aug. 5 price dip and subsequent recovery. That is reflected in Ether’s weekly relative strength index (RSI), which is treading inside its 40-60 neutral area.

Furthermore, Ether’s Ether’s sideways bias is strengthening due to its consolidation between two key exponential moving averages. Notably, ETH’s price is fluctuating inside the range defined by its 200-week EMA (the blue wave) as support and 50-week EMA (the red wave) as resistance.

The price consolidation between the two EMAs and the neutral RSI is similar to the August 2023—October 2023 session, which preceded a major price boom, as shown in the chart above.

This bullish fractal coincides with ETH’s price bouncing from the lower trendline of its prevailing ascending channel pattern, indicating a price target of around $4,750 by the end of 2024 or during the first quarter of 2025.

In other words, Ethereum’s technical indicators are showing signs of bottoming out.