Ethereum (ETH), the second-largest cryptocurrency by market cap, has faced a notable wave of sell pressure in early January, wiping out its recent gains. This dip has been fueled by multiple factors, including leveraged liquidations and significant spot outflows. However, new data reveals that whales are buying the dip, hinting at a potential recovery in the near term.
One of the key drivers behind Ethereum’s recent dip has been the sharp outflows from ETH spot ETFs. At the start of the week, Ethereum enjoyed strong inflows, with $128.7 million added on January 6, building on earlier gains from January 3.
However, this momentum was short-lived. On January 7, ETH spot ETF outflows amounted to $86.8 million, marking a significant pivot. This was accompanied by negative spot flows across exchanges, which peaked at $235.66 million on the same day.
The abrupt reversal in ETF flows created uncertainty among investors, leading to a wave of fear, uncertainty, and doubt (FUD). While Bitcoin ETFs remained positive during this period, Ethereum’s performance underscored its current dominance struggles in the market.
Another factor contributing to Ethereum’s recent downturn is the rise in leveraged trading activity. Over the past few months, the appetite for leverage has grown significantly, setting the stage for a sharp correction.
Long liquidations surged by over 700% since January 3, with more than $173 million worth of liquidations recorded in the last 24 hours alone. This spike indicates that the recent rally in early January may have been a setup for a leverage shakeout, leaving over-leveraged traders exposed.
This cascade of liquidations further amplified selling pressure, pushing Ethereum’s dominance down to 12.32%, a decline from its weekend high of 12.87%.
Despite the recent bearish trends, there is a silver lining: Ethereum whales have started accumulating during the dip. On January 7, whales purchased 519,620 ETH, while outflows were notably lower at 411,300 ETH. This suggests that larger investors see the current price levels as a buying opportunity.
This accumulation could play a pivotal role in stabilizing Ethereum’s price and supporting a potential rebound. Historically, whale activity has been a reliable indicator of market sentiment, and their recent purchases hint at confidence in Ethereum’s long-term prospects.
Ethereum’s recent pullback aligns with key support levels, both in terms of price and market dominance. ETH’s dominance currently sits at a zone that has previously demonstrated strong support, indicating the possibility of a bounce.
Additionally, the accumulation by whales suggests that the selling pressure may subside, paving the way for a recovery. If ETH manages to reclaim its dominance and stabilize above its current price levels, it could signal the beginning of a short-term rally.
While the current market environment remains challenging, Ethereum’s fundamentals and whale activity provide reasons for optimism. Investors should keep an eye on key indicators, such as spot flows, ETF trends, and whale accumulation, to gauge the next potential move.
For traders, the recent dip may offer a strategic entry point, especially if Ethereum holds above its key support levels. However, caution is warranted, as broader market trends, including Bitcoin’s performance, will continue to influence ETH’s trajectory.
Conclusion
Ethereum’s recent dip highlights the challenges of navigating a volatile market, but signs of recovery are emerging. As whales accumulate and sell pressure eases, ETH could stage a comeback in the days ahead. Traders and investors alike should watch closely for confirmation of a reversal, as the next move could set the tone for Ethereum’s performance in 2025.
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