On December 20th, Ethereum’s price continued its downward trend, dropping approximately 20% over the last four days. As of now, ETH is trading at $3,119, down roughly 15% over the last 24 hours.
Market Overview
The bearish performance of Ether on December 20th mirrored similar downside moves elsewhere in the crypto market. The total capitalization fell by approximately 9% to $3.21 trillion. This decline is a significant concern for investors, as it indicates a loss of confidence in the market.
Factors Driving Ethereum’s Price Down
Several factors are contributing to Ether’s price drop today:
Ethereum Futures Traders Turning Bearish
Futures traders have turned bearish, with the aggregated premium of futures positions becoming negative for the first time since November 6. This shift indicates that investors are now more cautious and expect a decline in prices.
Ethereum Liquidation Chart
Source: CoinGlass
Such high liquidation events can forcefully close long positions, resulting in a rapid, cascading price drop. Over $299 million in positions were liquidated during the latest drop, with $270 million of them being longs.
Ethereum ETF Flows Turn Negative Again
Investors’ de-risking behavior was also visible across spot Ethereum exchange-traded funds (ETFs), with significant outflows. After recording positive net flows for 18 consecutive days, data from SoSoValue shows US-based spot Ether ETFs recorded outflows totaling $60.47 million on December 19.
Ether ETF Flow Chart
Source: SoSoValue
Grayscale’s ETHE fund, which witnessed its first-ever net inflows on December 12, was the primary driver behind December 19 Ethereum ETF withdrawals with a total of $58.13 million outflows.
Profit-Taking Adds to Ether Price Headwinds
Ethereum’s downturn could also be attributed to profit-taking by early holders and short-term speculators following Ether’s run above $4,100. The Dormant Coins Circulation metric by Santiment reveals that short-term holders (STH) are partially responsible for the sell-pressure, as shown by the slight uptick in the circulation of Dormant Coins aged 90, 180, and 365 days.
ETH Dormant Coin Circulation (STH)
Source: Santiment
Most of these STHs are selling at a loss, with realized losses crossing $60 million over the past 48 hours. One notable entity is the Ethereum Foundation, which sold approximately 100 ETH on December 17, according to data from Lookonchain.
Double Top Formation Confirmed
Ether’s sell-off saw it lose the support provided by the $3,500 psychological level on December 19, data from Cointelegraph Markets Pro and TradingView shows. This decline validates a double-top pattern, which ETH price formed on the four-hour chart. With the loss of the pattern’s neckline support at $3,500, ETH could extend the correction to $3,000.
ETH/USD Four-Hour Chart
Source: Cointelegraph/TradingView
On the other hand, the relative strength has crossed into the oversold region, indicating prices could soon see a relief bounce in the shorter term. However, it is essential for investors to note that this article does not contain investment advice or recommendations.
Conclusion
Ethereum’s price drop and total crypto market cap fall are significant concerns for investors. Several factors, including Ethereum futures traders turning bearish, Ethereum ETF flows turning negative again, profit-taking by early holders, and double top formation confirmed, contribute to the decline in prices. Investors should conduct their own research when making a decision, as every investment and trading move involves risk.
Recommendations
- Stay up-to-date with market news and trends.
- Conduct thorough research before making any investment decisions.
- Consider diversifying your portfolio to minimize risks.
By following these recommendations and staying informed, investors can make more informed decisions and navigate the ever-changing crypto market with confidence.
