Ethereum, the second-largest cryptocurrency by market capitalization, has been under significant pressure in recent weeks. As its price continues to fluctuate, analysts are watching its market signals to determine whether the current phase is one of accumulation or distribution.
According to a recent analysis by CryptoQuant analyst Shayan, the Ethereum Exchange Reserve metric, which tracks the amount of ETH held in exchange wallets, provides insight into this question.
What is the Ethereum exchange reserve currently reporting?
Shayan revealed in the analysis shared in a post on the CryptoQuant QuickTake platform that the Ethereum exchange reserve metric showed a notable upward trend between June and August, indicating a distribution phase that contributed to the ongoing bearish trend.
This move is particularly notable given that coins held on exchanges are often considered ready to be sold, which can lead to increased selling pressure.
According to Shayan, the recent “death cross” on the Ethereum price chart, where the 100-day moving average crossed below the 200-day moving average, has raised fresh concerns.
Following this technical signal, the foreign exchange reserves measure rose sharply, suggesting that another phase of distribution could take place.
The analyst noted that this increase in reserves on exchanges could indicate a potential decline in demand for Ethereum, which could lead to further price declines. However, Shayan noted that the state of the futures market, a critical factor in determining prices, must also be analyzed before drawing “definitive conclusions.”
Foreign exchange reserves signal new phase of distribution amid death concerns
“As Ethereum reserves on exchanges continue to grow, the likelihood of a decrease in demand – and therefore, a further price decline – also increases.” – By @ShayanBTC7
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— CryptoQuant.com (@cryptoquant_com) September 2, 2024
Ethereum Price Evolution and Market Sentiment
Despite worrying signals from the exchange reserves metric, Ethereum managed to stage a modest recovery over the past day.
The cryptocurrency has seen a 2.2% increase, bringing its current price to $2,515 at the time of writing. However, this increase hardly makes up for the 7% drop that Ethereum has seen over the past week.
Famous crypto analyst CrediBull, commenting on the recent Ethereum price action, stressed that the situation is still evolving. He noted:
Nothing has really changed on ETH here. We went a little lower, but OI just went down even more, funding is negative and we are just back to our local lows.
CrediBull suggests that Ethereum could sweep lows towards local demand before forming a deviation and potentially moving higher.
He also cautioned against overreacting to short-term volatility, stressing the importance of managing risk and sticking to the plan if fundamental market conditions have not changed significantly.
Featured image created with DALL-E, chart by TradingView
