Ethereum (ETH) has been a standout performer in recent months, outperforming both traditional markets and most sectors of the cryptocurrency space. However, despite its strong gains, recent investor behavior suggests caution is creeping into the market. While ETH maintains technical strength and dominance, emerging trends in sentiment and liquidity flows point to a possible near-term consolidation.

Over the last few months, Ethereum has rallied approximately 58%, fueled by broader market optimism and strong performance in the decentralized finance (DeFi) space. Yet, recent data shows that short-term sentiment may be weakening. This shift comes even as ETH continues to lead in attracting market liquidity, signaling a divergence between price action and trader confidence.

Ethereum Leads Against Traditional Markets

Ethereum’s recent gains have not only outpaced major cryptocurrencies but also surpassed the performance of traditional financial benchmarks like the S&P 500. According to data from Artemis, ETH recorded a 19.6% increase over a recent multi-week period, while the S&P 500 rose by just 12.5%. This 7.1% gap highlights how digital assets, particularly ETH, have gained favor among investors seeking higher returns.

ETH has also outperformed most major crypto sectors, with the exception of the NFT market. The NFT segment has registered a 57.7% increase in value, based on a weighted sectoral average. Still, Ethereum remains a central player in this ecosystem, indirectly benefiting from the NFT surge through increased usage and network activity.

Short-Term Market Sentiment Shows Weakness

Despite this broader strength, short-term market indicators are pointing to a shift in trader behavior. Lower-timeframe sentiment—especially among retail and spot market participants—has taken a turn. In the last 24 hours alone, spot traders have sold approximately $19 million worth of ETH, according to data from CoinGlass. This offloading suggests a growing desire among some investors to take profits or reduce risk exposure.

In addition, the total value locked (TVL) in Ethereum-based DeFi protocols has seen a notable decline. As of May 14, TVL stood at $64.64 billion, but by May 18, that figure had dropped to $61.202 billion. This $3.438 billion decrease in TVL likely reflects significant withdrawals of ETH from DeFi platforms, possibly for selling or repositioning into other assets.

The decline in TVL and rising outflows are generally seen as bearish indicators, as they suggest that capital is moving away from Ethereum’s ecosystem rather than being invested or reinvested in DeFi applications.

Liquidity Levels Suggest Cautious Optimism

Looking at Ethereum’s 24-hour liquidation heatmap, analysts have identified a large liquidity cluster around the $2,477 level. Liquidity clusters are areas on the chart where large concentrations of buy or sell orders exist, and they often attract price movement due to the availability of liquidity.

This $2,477 cluster appears to be a key support zone, with approximately $33.06 million in buy orders concentrated there. If ETH trends lower, this area could serve as a buffer, providing enough demand to absorb selling pressure and possibly prompt a reversal.

Interestingly, even as some investors exit, others appear to be buying the dip. Reports from AMBCrypto indicate that $32 million worth of ETH has been purchased in the past 24 hours. This steady inflow of capital is helping to slow ETH’s downward movement, even as broader sentiment remains cautious.

Outlook: Consolidation Before Next Move?

Ethereum continues to show resilience in the face of shifting market sentiment. While short-term traders have been taking profits and DeFi capital has retreated slightly, Ethereum still benefits from strong network fundamentals, increasing mainstream adoption, and long-term investor interest.

The next few days may be critical. If ETH can hold above key liquidity levels and attract sustained buy-side interest, it could build a strong base for another rally. However, if bearish pressure continues and sentiment deteriorates further, Ethereum may experience a temporary consolidation phase.

Investors will likely be watching closely for signs of stabilization in on-chain metrics and spot market flows. For now, Ethereum remains a top-performing asset, but its immediate trajectory may depend on how market participants respond to emerging signals of short-term weakness.