Ethereum fell below the short-term support level at $3300 as sellers tightened their grip.
Ethereum's balance on exchanges drops to its lowest level in nine years as capitulation continues.
Institutional and retail interest remains subdued amid ongoing outflows from ETFs and declining open interest.
Ethereum ($ETH ) has resumed its downward trend, trading below $3300 at the time of this report on Thursday. The bearish outlook reflects Bitcoin's ($BTC ) decline during the day to below 101,000.
Overall, the recovery in the cryptocurrency market has become a daunting battle, as evidenced by the decline in institutional and retail demand. However, Ethereum's balance on exchanges continues to decline, suggesting that potential selling pressure in the opening market is fading, which may support the next upward phase.
Assessment of Ethereum reserve pressure on exchanges
Ethereum's balance on exchanges peaked at around 35.5 million ETH in August 2020 and has steadily declined to 13.3 million Ethereum as of Wednesday, according to Glassnode data.
The continuous decline in exchange reserves indicates ongoing accumulation, as holders move to self-custody or storage. The effect is a reduction in the available supply for sale in the open market, which alleviates downward pressure and may support price increases driven by scarcity.
Ethereum ETF statistics | Source: SoSoValue
Meanwhile, institutional investors have retreated to the sidelines, reducing their exposure to Ethereum-related exchange-traded funds. SoSoValue data shows that U.S.-listed ETFs experienced outflows of around $119 million on Wednesday, leading to total net outflows of $13.9 billion and net assets of approximately $22.74 billion.
Three out of nine exchange-traded funds in Ethereum recorded net inflows, including Grayscale's ETH fund of $24 million, Fidelity's FETH fund of $3.45 million, and 21Shares' TETH fund of approximately $515,000. BlackRock's ETHA funds led the outflows, with around $147 million in outflows.
Ethereum reserves on exchanges | Source: Glassnode
Retail demand for Ethereum is also on a continuous decline, with open interest in futures dropping to $38.6 billion from its peak of around $63 billion in October.
Open interest, which indicates the nominal value of outstanding futures contracts, serves as a measure of investor interest and confidence in the asset. The ongoing decline suggests that traders are closing their long positions in favor of short positions, contributing to selling pressure.
Ethereum open interest | Source: CoinGlass
Technical outlook: Ethereum declines further as risk-averse sentiment continues
Ethereum is trading below $3300 at the time of this report on Thursday, significantly affected by negative sentiment in the broader cryptocurrency market. Based on the daily chart, sellers hold the advantage, especially with the relative strength index at 32 and nearing oversold territory.
The moving average convergence divergence (MACD) indicator has maintained a sell signal since Monday, urging investors to reduce their exposure.
Traders will monitor a daily close below the short-term support level to determine the bearish outlook for Ethereum. Key bearish targets include $3057, which was tested on Tuesday, and $2880, which was tested in June.
The daily chart for the ETH/USDT pair
However, a quick reversal may occur if bulls buy the dip, bolstering the tailwinds to push Ethereum above the 200-day exponential moving average at $3599.