Key Insights:
- Ethereum price eyes recovery as positive ETH ETF flows disrupt the outflows streak.
- The latest data indicate that the institutions are regaining confidence in ETH.
- Ethereum network fees signal that network activity might be heating up.
Ethereum price has extended its sideways movement into the second week of September. But a closer inspection of demand dynamics and its network activity revealed that it could be about to exit the trend.
The first major sign pointing towards a potential Ethereum price recovery was renewed institutional activity. Ethereum ETFs sustained a continuous streak of outflows from 29 August to 8 September.
ETH ETFs registered $44.2 million worth of inflows on Tuesday courtesy of BlackRock. ETF flows also remained positive on Wednesday, but were lower at $16.6 million as Grayscale tested the waters.
Institutional involvement also raised prospects of bullish activity. For example, the Bitmine crypto firm has reportedly spent over $44 million to acquire 10,320 ETH.
Negative institutional flows have been holding back the Ethereum price action. But despite this, the ETH price still managed to hold on to a key support level near $4300 in the last 2 weeks.
Moreover, the sideways price action underscored bearish exhaustion after the pullback that the ETH price experienced in the last week of August. Moreover, price has been hovering within its 50% RSI level.
Ethereum Price in Focus as Spot Flows Turn Positive
Ethereum spot flows demonstrated a bullish bias so far this week, according to CoinGlass data. The crypto flipped to positive netflows since 7 September, which was indicative of accumulation and a potential rally in Ethereum price.
However, ETH’s MFI indicator (money flow) still maintained a downward trajectory.
Ethereum futures open interest also jumped back above $60 billion on Wednesday, signaling growing confidence in the market. However, this did not lead to a significant price move.
The most plausible explanation for this was that whales were suppressing the ETH price action. Large order flow data across multiple exchanges signaled that whales still leaned on the bearish side.
ETH large order book data revealed that whales sold off over $122 million worth of Ethereum in the last 24 hours. This was across Binance, Coinbase, and OKX. This was just in the spot segment.
The bearish sentiment among the whales was much thicker on the derivatives side, where they executed over $2.5 billion worth of short positions. This was on Binance and OKX futures.
The bearish sentiment among the whale cohort was indicative of downside expectations. This outcome suppressed the bullish buildup observed in the first half of the week and risked causing capitulation.
Sustained sell pressure may push Ethereum price towards the $4,000 price tag in the short term. Especially if the bulls fail to put up a stronger fight.
A potential reason for the whale situation was that they might be waiting for economic data such as U.S consumer and producer price index data in the second half of the week. This kind of data tends to influence market sentiment and could potentially tip the scales in favor of the bulls or bears.
Ethereum Network Activity is Heating Up
Network performance has historically been a significant factor in determining price outcomes. The Ethereum network just recorded the highest daily network fees compared to other existing chains.
This outcome warranted a closer look under the hood of the Ethereum network. The data revealed that daily transactions cooled down to 1.34 million TXs on Sunday.
However, they bounced back during the first half of the week a daily average of about 1.66 million transactions.
Active addresses also bounced back slightly during the same period, which underlined growing confidence. DEX volume hit a multi-month low of $1.63 billion on Sunday, but it maintained an average of over $3.3 billion in the last 3 days.
Rising network activity means more trading volumes and a potential impact on Ethereum price dynamics. These observations may aid in knocking ETH off its sideways trend.