The price of Ethereum resumed its downward trend on Friday, May 22, after consolidating throughout the week. Following this distribution cycle, the second largest cryptocurrency fell by approximately 6.2%, forming a local bottom at $2,020.
Although Ethereum has a seemingly bearish structure, a recent on-chain analysis revealed notable buying activity in its market. Still, Ethereum’s price weakness appears almost unchecked – below are the details of its current on-chain dynamics.
Spot buyers step in, but ETH continues to fall
In a recent Quicktake article on the CryptoQuant platform, on-chain analyst Carmelo Alemán outlined the factors behind Ethereum’s current price weakness. In his analysis, Alemán revealed that the altcoin’s current downward trend is not due to a lack of demand in the spot market.
Alemán said, in fact, the Spot Taker CVD reflects the fact that the Ethereum spot market is still Taker Buy Dominant. This means that aggressive buyers in the market execute more buy orders than sellers execute sell orders in a given period.
Source: CryptoQuant
Despite this, Ethereum price does not appear to be strengthening significantly from a broader perspective. While the CVD Spot Taker showed the aforementioned sign, the price of ETH actually contracted from $2,339 on May 11 to $2,065.8 on May 22.
However, it is worth noting that spot trading activity has also contracted sharply since May 11, with spot volume apparently falling from around 470,770 ETH to 256,963 ETH (a decline of over 45%); this represents a decline of 52.65%, from approximately $1.10 billion to $521.4 million.
Derivatives and foreign exchange activities show mixed signals
Furthermore, the crypto analyst pointed out that the Ethereum derivatives market has yet to demonstrate strong conviction in the bullish behavior of its traders. “Open interest is moving sideways: from $15.43 billion to $15.54 billion, or just +0.69%,” Alemán noted.
Even if this is the case, CVD Futures still point to a dominance of long positions, indicating that many participants continue to bet on a rebound. Interestingly, Alemán pointed out that funding rates have also remained positive since May 11, meaning that long traders are paying short traders to maintain their positions.
In addition to the listing, the on-chain analyst revealed that Ethereum’s cumulative net exchange flow was also negative, close to -80,507 ETH. This means that more ETH was withdrawn from exchanges than was sent to them.
Generally, this should be a bullish sign for Ethereum price, as coins away from exchanges are often held for storage rather than sale, which is typical of high net inflows. Yet, Ethereum price failed to gain any bullish strength.
Alemán mentioned that Ethereum’s current trend could only be due to a greater supply available for sale compared to current demand. This results in the absorption of upward pressure that would have otherwise increased in the spot and futures markets.
The analyst concluded:
Until ETH recovers spot volume, breaks resistance, and confirms healthy derivatives expansion, bearish pressure will most likely remain dominant. In the short term, the price appears to be heading towards the $1,984 support, and if it breaks, the next stop could be the $1,937 support.
At the time of writing, the Ethereum price stands at $2,114, up more than 2% over the past day.
The price of ETH on the daily timeframe | Source: ETHUSDT chart on TradingView
Featured image from iStock, chart from TradingView
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