Ethereum price resumed its downward trend on Friday, May 22nd after holding steady throughout the week. As a result of this distribution round, the second-largest cryptocurrency fell by approximately 6.2%, forming a local bottom at $2,020.
While Ethereum has an ostensibly bearish structure, recent on-chain analysis has revealed notable buying activity in that market. However, Ethereum price weakness appears to be largely unchecked. Below are details of the current on-chain dynamics.
Spot buyers enter, but ETH continues to fall
In a recent Quicktake post on the CryptoQuant platform, on-chain analyst Carmelo Alemán outlined the factors behind Ethereum’s current price slump. In his analysis, Aleman revealed that the current downward trend of altcoins is not due to a lack of demand in the spot market.
Alleman said that spot taker CVD actually reflects that the Ethereum spot market remains taker-buy dominated. This means that over a given period of time, active buyers in the market execute more buy orders than sell orders by sellers.
Source: CryptoQuant
Nevertheless, from a broader perspective, Ethereum’s price does not appear to be increasing significantly. The price of ETH actually shrank from $2,339 on May 11th to $2,065.8 by May 22nd as spot taker CVD showed the aforementioned signs.
However, it is worth noting that spot trading activity has also declined sharply since May 11th, with spot trading volume reportedly decreasing from approximately 470,770 ETH to 256,963 ETH (a decrease of over 45%). This represents a 52.65% decrease from approximately $1.1 billion to $521.4 million.
Derivatives and currency activity show mixed signals
Furthermore, the cryptocurrency analyst pointed out that the Ethereum derivatives market has not yet shown strong confidence in the actions of bullish traders. “Open interest remains flat: from $15.43 billion to $15.54 billion, barely +0.69%,” Aleman noted.
While this is true, futures CVD still shows that long positions are predominant, indicating that many participants continue to bet on a rebound. Interestingly, Aleman pointed out that the funding rate has also remained positive since May 11, meaning that long traders are paying short traders to maintain their positions.
In addition to the list, on-chain analysts revealed that Ethereum’s cumulative Exchange Netflow is also negative, near -80,507 ETH. This means that more ETH was withdrawn from the exchange than sent to it.
Typically, this should be a bullish sign for Ethereum price. Coins leaving exchanges are often kept for safekeeping rather than for sale, which is a typical reason for increased net inflows. However, Ethereum price failed to gain any bullish momentum.
Aleman said Ethereum’s current trend is simply due to more supply being available for sale compared to current demand. This absorbs any bullish pressure that would be coming from both the spot and futures markets.
Analysts concluded:
Bearish pressure is very likely to remain dominant until ETH recovers spot volume, breaks resistance, and sees healthy expansion in derivatives. In the short term, the price looks heading towards the $1,984 support and if it breaks out, the next stop could be the $1,937 support.
As of this writing, Ethereum’s price is $2,114, up more than 2% in 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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