The price of Ethereum (ETH) has slid below $4,200 after retreating from a peak of nearly $4,770. There are many factors contributing to this decline, including outflows from the ETF and profit-taking by institutions.
Let's analyze some of the main reasons for the drop in ETH's price.
Outflows from the Ethereum ETF surged amid a wave of selling by institutions.
Data from SoSo Value shows that Ethereum ETFs have recorded massive outflows in recent trading sessions, with $196.62 million withdrawn net on August 18.
Previously, on August 15, $59.24 million was withdrawn, while on August 14, this figure reached $639.36 million. This consecutive string of outflows is happening alongside the weakening of ETH’s price since the recent peak.
The daily ETF performance shows that some sessions with inflows have somewhat offset the large outflows. On August 13, inflows recorded $799.14 million, while August 12 added another $523.92 million to the fund.
On August 11, $1.02 billion in inflows were recorded, while August 8 noted $461.21 million in positive inflows.
The weekly ETF model shows volatility in demand from institutions, with the week ending August 18 having outflows of $196.62 million.
The week ending August 15 recorded inflows of $547.82 million, while the week ending August 8 added $326.83 million. The first week of August (ending August 1) also recorded $154.32 million in positive inflows before the recent decline occurred.
The total value held by the ETF peaked at around $12.47 billion before dropping to the current level during the sell-off.
Weekly data shows that July recorded massive inflows, with July 25 reaching $1.85 billion and July 18 recording $2.18 billion. July 11 contributed an additional $907.99 million and July 3 added $219.19 million to the total value held.
The institution sold 5,000 ETH, reaping a profit of $21.56 million.
According to data from Lookonchain, Longling Capital has sold an additional 5,000 ETH worth $21.56 million in recent trading sessions to take profits from the market's price increase.
This institution has built a reputation for its successful rotation trading strategy, buying at low price zones and selling when prices are high during market cycles.
The trading history of this institution over two years shows impressive profits thanks to strategic positioning and timing.
Longling Capital withdrew 123,405 ETH worth $290 million from Binance at an average price of $2,349 during accumulation phases. They then deposited back 70,800 ETH worth $248 million on the exchange at an average price of $3,502.
This trading strategy has yielded $184 million in profit over two years, thanks to the correct execution of the buy low - sell high strategy.
Analyst Ted believes there is additional selling pressure from Binance's activity to liquidate leveraged long positions.
The exchange has been accused of dumping millions of ETH to trigger liquidation orders before pumping the price back up. This creates favorable volatility for institutional traders but harms retail investors.
According to Ted's analysis, there is currently the largest leveraged short position ever on ETH. If this coin rises from the current price range, the short positions will suffer heavy losses.
ETH price at $3,900 opens up accumulation opportunities.
Analyst Lau believes that the current price drop of ETH is an interesting opportunity for investors. The healthy correction to the trendline support around $3,900 is seen as a gift to accumulate according to technical analysis.
According to Lau, this is the final accumulation zone before ETH regains the $4,800 mark and heads towards a new all-time high. Michaël van de Poppe also released an analysis, indicating that the first bounce zone has been confirmed when ETH returned to the EMA 20 area.
The volatility is expected to slow down compared to the current state, creating conditions for altcoins to break out strongly. Technical charts show buying zones to catch the bounce, with the bottom area having a 70% probability according to the analysis.
Data from Glassnode shows strong participation from investors during the correction from the $4,700 range. Accumulation around the $4,400 level has also helped stabilize the downward pressure, as part of the supply is quickly redistributed at higher price levels.
Additionally, Glassnode data shows that ETH's price increase has stalled at the +1σ Active Realized Price around $4,700, which was last surpassed in March 2024.
This level has repeatedly acted as resistance in previous cycles. This means that the current correction provides a healthier entry point as prices remain below this resistance level.
All of the above factors, along with the general weakening of the market, have caused the price of ETH to correct from its recent peak.