Ethereum remains under pressure at press time, if the daily chart formation is anything to go by. In summary, ETH is flat on the last day but down 9% over the last week of trading. It is worth noting that there has been a drastic drop in trading volume over the last few days.
Overall, traders are bullish and expect prices to reverse and surge higher, clearing immediate local resistances. Even if this develops, on-chain data points to further developments that leveraged traders should keep a close eye on.
Over 40,000 ETH transferred from derivatives exchanges
According to an analyst, citing data from CryptoQuant, there have been more capital outflows from derivatives exchanges in recent trading weeks. Specifically, the analyst observed that more than 40,000 ETH were moved from derivatives trading platforms like Binance and OKX.
From a trading perspective, whenever there is an increase in capital outflows from derivatives to cash markets, it may suggest that traders are cautious and waiting for clearer definitions before committing. However, this is also positive, especially when you consider that capital outflows from derivatives mean an increase in capital inflows to cash markets.
When deposits in spot markets increase, especially from derivatives markets, and not from external non-custodial wallets, the decline in speculative pressure can support prices. As capital outflows increase in derivatives markets, this indicates that fewer traders are willing to bet on cryptocurrency prices, by placing leveraged short or long positions.
In light of this development, price action over the next few trading sessions will be crucial. Technically, a drop below $2,100 and the August lows could trigger a selloff, forcing even more leveraged traders to go into preservation mode and move coins to spot coins and, from there, potentially to stablecoins.
Conversely, a reversal above $2,800 could lift morale and sentiment, forming a base for another leg up to $3,000 and $3,500. In turn, confidence will increase, forcing more traders to borrow ETH from exchanges when placing leveraged positions.
Ethereum Gas Fees and Institutional Demand Fading
Against this backdrop, Ethereum continues to face headwinds. For example, some analysts believe that falling gas fees could negatively impact demand, calling into question the network’s long-term viability.
As of September 9, Ethereum gas fees stood at 2.862 gwei, down from 14.21 gwei a year ago, according to YCharts.
Additionally, institutional demand for Ethereum via spot ETFs continues to decline. Year-to-date, net outflows from all Ethereum spot ETFs in the U.S. exceed $568 million, according to SosoValue.
Main image from Canva, chart from TradingView
