ETH price risked bearish capitulation after a week of negative Ethereum ETF flows. The cryptocurrency has been struggling to regain bullish momentum, but institutional outflows further weakened market confidence.
Ethereum ETFs have maintained negative daily outflows since 29 August. The trend played out in the first week of September, during which roughly $787 million worth of outflows were observed.
Ever since they launched, Ethereum ETF flows have been a decent yardstick for measuring the level of market confidence. The recent outflows may thus signal that institutions were losing confidence in ETH’s potential upside.
This outcome may potentially set ETH up for more liquidity outflows this coming week. It also marked the second-highest weekly outflows that the Ethereum ETF has ever experienced.
Ethereum ETF Outflows Risk Triggering ETH Price Capitulation
ETH price was on track to conclude the week with a 2% plus decline from its weekly opening to closing price.
However, a closer look at the daily timeframe revealed that the cryptocurrency has been experiencing support at the $4,300 price level despite the institutional sell pressure.
Moreover, the latest price also pushed ETH’s RSI to its 50% level. In other words, the bulls and bears have been fighting for dominance during the week.
However, the negative Ethereum ETF flows may tip the scales in favor of the bears, especially if they remain negative in the coming week.
ETH’s MFI indicator also confirmed that liquidity has been flowing out of the cryptocurrency. These outflows underscored the recent market environment underpinned by deteriorating sentiment.
A contrast to the first half of August, during which market sentiment remained strong and favored more upside. Risks of inflation and speculation that the stock market bubble might pop have recently pushed the markets towards a cautious approach.
The same cautious sentiment extended to the crypto market, considering that it is also within the risk-on category, just like stocks. Consequently, bearish sentiments have been rising, and it might be a ruse aimed at triggering a massive liquidation event.
Whales and Institutions Hedge their Bearish Bets with Long Futures Positions
While recent Ethereum ETF outflows and ETH’s struggle to secure bullish momentum signaled the possibility of more downside, the whales might be setting a bear trap. ETH weighted funding rates jumped from 0.0011% to 0.0071% in the last 24 hours.
A spike in funding rates is uncharacteristic unless in cases where sentiment shifts to bullish. It is also unlikely when there is uncertainty and price risks, capitulation.
However, there was one potential explanation that aligned with the idea that whales might be preparing to trap the bears.
Recent Glassnode data revealed that Ethereum ETF and whales have been hedging their outflows with bullish CME futures positions. This suggests that Ethereum whales and institutions may still benefit if ETH price bounces back.
But, despite these observations, the spot and derivatives demand remained relatively weak. This meant the tables could still turn quickly, hence ETH’s current support may crack if subjected to more selling pressure.
These observations aligned with CoinGlass data, which disclosed about $671 million perpetual futures positions executed on Binance and OKX in the last 2 days. This may also explain why the recent weekly Ethereum ETF outflows did not yield enough sell pressure for ETH to lose its $4,300 support.
CoinGlass whale orderbook data also revealed that whales have been buying ETH in the spot market during the weekend. They acquired about $18 million worth of ETH on Binance, OKX, and Coinbase in the last 2 days.