The On-Chain Activity of Ethereum Generates Contradictory Signals in the Midst of Falling Inflation

• Ethereum may experience a significant upswing in the third quarter due to the decrease in US inflation and the introduction of spot ETH ETFs.
• The on-chain activity of Ethereum indicates a varied sentiment among investors.
• A potential decline for ETH may be indicated by a bearish exhaustion candle, significantly if the approval of an ETH ETF by the SEC is delayed.

Ethereum (ETH) experienced a modest 0.5% increase on Thursday, driven by the release of favorable inflation data in the US. Nevertheless, there is a blend of on-chain sentiment that indicates some hesitancy among investors, even though there is the possibility of spot ETH ETFs being introduced.

Market Movers in the Daily Digest: Consumer Price Index (CPI) Data, Conflicting On-Chain Indicators, and a Rise in Supply

The price of Ethereum is anticipated to respond favorably in the upcoming days due to the recent decrease in the US Consumer Price Index (CPI), which is a measure of the expenses associated with goods and services. In a surprising turn of events, the Consumer Price Index (CPI) for June experienced a slight decrease of 0.1% compared to the previous month. This result surpassed the predictions of market analysts and marked the lowest level seen in the past three years. Consequently, there is widespread anticipation that the Federal Reserve (Fed) will decrease interest rates in September.

With the imminent introduction of spot ETH ETFs, there is widespread anticipation that Ethereum will experience a favorable Q3. This is in line with forecasts made by JP Morgan analysts, who anticipate a recovery in the cryptocurrency market during the month of August.

In addition, data from Lookonchain reveals that Ethereum has experienced a significant amount of exchange deposits and withdrawals within the last 24 hours, as indicated by on-chain activity. There appears to be a range of emotions and a sense of uncertainty among ETH investors. While some investors are reducing risk, others are steadily building up selling pressure, resulting in a relatively stable price trend for ETH.

Several significant transactions have taken place recently. Golem has decided to halt its selling of ETH after staking a substantial amount of 40,000 ETH. Additionally, a large investor has deposited 10,000 ETH into Binance, while another has withdrawn 16,074 ETH in the past week. Furthermore, HTX founder Justin Sun has chosen to increase his holdings of ETH.

Meanwhile, even with the growing number of staking deposits, the supply of ETH has begun to rise following the Ethereum Dencun upgrade in March and according to the chart provided by Bitwise, the supply of ETH experienced a consistent decline, reaching -450K between The Merge and Q1 ’24. The upward trend began in the second quarter of 2024 after the implementation of the Dencun upgrade. If ETH continues down this trajectory, it will forfeit its deflationary standing.

ETH Technical Analysis: Ethereum Displays a Candle Indicating a Potential End to the Bearish Trend

On Thursday, Ethereum was priced at approximately $3,125, reflecting a modest 0.5% increase for the day. ETH has experienced a significant number of liquidations, totaling $26.27 million, within the last 24 hours. The liquidations can be further broken down into $17.05 million for long positions and $9.23 million for short positions.

Despite the overall pessimistic market conditions, ETH is gradually climbing, recovering from its losses over the week, as investors eagerly await the introduction of spot ETH ETFs.

Nevertheless, ETH displayed a candle of bearish exhaustion in the 8-hour time frame following its effort to maintain a breakthrough above the $3,200 price. An exhaustion candle is characterized by a lengthy wick that is approximately 2-3 times the size of its body, with minimal or no wick on the opposite side. When a bearish exhaustion candle emerges amidst an uptrend, it suggests that the bullish momentum might be waning. Similarly, if a bullish exhaustion candle materializes in a downtrend, it implies that the bears could be losing their grip.

ETH/USDT 8-hour chart

Regarding ETH, the reversal indicates that a portion of the more than 2 million addresses that bought ETH at approximately $3,200 decided to sell when they reached the breakeven point, as previously anticipated.

Although there are indications that ETH may experience a downward trend following the bearish exhaustion candle, there is some optimism due to the release of lower-than-anticipated CPI data and the approval of issuers’ ETH ETF S-1 drafts by the Securities & Exchange Commission (SEC). This positive news may encourage ETH to make another attempt to surpass the $3,200 price level. The upward movement could potentially result in the liquidation of approximately $3.73 million worth of short positions, occurring at the price level of $3,222.

Nevertheless, should the SEC persist in postponing the endorsement of an ETH ETF, Ethereum will probably regress to the price range of $2,900 to $3,000.