Ethereum (ETH) price has experienced a significant downturn, capitulating in favor of the downside after struggling to maintain a bullish footing over the weekend. Further investigation into its recent performance has revealed key details, including the top beneficiaries of this price crash.
A recent analysis conducted by Bravos Research has shed light on the reasons behind Ethereum's short-term sell pressure. The analysis also noted a particular cohort of large participants who have been buying aggressively over the past two months.
The Ethereum price has dropped by over 20% since Monday. Many investors had anticipated a recovery, but weak demand ultimately led to a change in market sentiment. The cryptocurrency registered its highest short positions in history earlier this week, confirming aggressive bearish expectations.
While the aggressive short positions highlighted market sentiment, another major observation contributed to the bearish outcome. It appears that long-term Ethereum whales have been aggressively offloading their ETH holdings. A CryptoQuant analysis of Ethereum's supply held by long-term holders revealed aggressive outflows this year. Elevated prices in the last few months have attracted significant profit-taking, leading to long-term whale balances recently dropping to multi-year lows. These observations have significantly contributed to ETH’s struggle to regain a bullish footing.
The outflows from long-term holders confirmed profit-taking and also put the market on edge with concerns that the cycle top might already be in.
The Next Possible Move for Ethereum (ETH) Price
While selling pressure from long-term holders and short positions has been pushing Ethereum (ETH) downward, the data also indicates rising demand from other sources. Large accounts holding between 10,000 and 100,000 ETH have been aggressively increasing their balances over the last three months. Such large inflows are often linked to institutional demand.
In other words, institutions have been taking advantage of the discounted prices lately. This includes Ethereum treasuries such as Bitmine, Bit Digital, and Gamesquare Holdings, among others. The aggressive demand from these major players suggests a long-term bullish expectation. This outcome also raises the possibility that ETH price might recover similarly to its performance in 2021. The cryptocurrency experienced a double top during the previous bull cycle, underscored by a major pullback after its May 2021 top, followed by a second top in November of the same year.
Correlation Between Demand from Big Payers and Current Liquidity Cycle
The Bravos Research analysis also highlighted an interesting pattern that may offer insights into what to expect from Ethereum (ETH) price action moving forward. The analysis revealed that institutional demand has been rising as rate cuts have been implemented in the U.S. As a result, big players may be utilizing debt to aggressively build up their positions.
It is worth noting, however, that these same companies have maintained low debt levels so far. Nevertheless, declining borrowing rates may encourage more debt-driven purchases as rate cuts push borrowing costs lower. Such an outcome could consequently fuel more demand for ETH, but it may also present a double-edged sword. The same companies could end up aggressively offloading their ETH holdings once rate hikes make a comeback, meaning the companies buying now could potentially trigger the next bear market.
In the meantime, these same companies have been providing a bullish lifeline to the cryptocurrency. The aggressive demand from big players signals bullish expectations in the near term.