On-chain, a mix of fundamental and technical factors suggest that leading altcoin Ethereum bulls have more pain ahead.
Leading altcoin funds are losing capital en masse
As you can follow from cryptokoin.com news, Ethereum (ETH) will exceed half of its value in dollar terms in 2022. It also depreciates against Bitcoin (BTC) and is pegged below $2,000 for various reasons. Moreover, according to experts, the leading altcoin price could face even bigger losses in June due to a number of other factors.
According to CoinShares’ weekly market report released on May 31, investors have withdrawn $250 million from Ethereum-based mutual funds in 2022. The big exit looks unlike other cryptocurrencies. For example, investors poured $369 million into Bitcoin-based mutual funds in 2022. Meanwhile, Layer-1 Blockchain protocols Solana (SOL) and Cardano (ADA), competing with Ethereum, have attracted $104 million and $9 million respectively.
Flow to/from crypto funds/Source: CoinShares/Bloomberg Retractions from Ethereum funds, decentralized finance from the recent crash in TerraUSD (UST) and Terra (LUNA) DeFi) is interpreted as a sign of how it has reduced interest in the industry.
ETH’s bullish prospects continue to stick with expectations of the DeFi market booming. Because Ethereum’s Blockchain is home to most of the financial applications in the industry. As of June 5, the total value locked (TVL) within Ethereum-based applications was $68.71 million, almost 65% of the total DeFi TVL.
Ethereum TVL as of June 5th / Source: DeFi Llama However, TVL announced on May 9 that Luna Classic (LUNC) and TerraUSD Classic (USTC) ) still reflects a major pullback from Ethereum’s DeFi pools, which hovered around $100 billion before its collapse. Combined with the macro risks led by the Federal Reserve’s hawkish policies and a cautious outlook around the DeFi sector, Ethereum looks poised to continue its decline in June, according to
Tagus Capital partner Ilan Solot. On the matter, he wrote to the Financial Times:
If the Federal Reserve is tightening, the world is in recession and people have to pay $4.5 per gallon of gas, they will have less to invest in DeFi or spend on Blockchain games.
Technical view of the leading altcoin project
Crypto analyst Yashu Gola said that the trading behavior witnessed since May is also bearish for Ethereum. indicates a trend. According to the analyst, Ethereum is fluctuating within a range defined by horizontal trendline support and falling trendline resistance. The analyst says the pattern looks more or less like an ‘ascending triangle’, forming a bearish continuation pattern when formed during a downtrend.
As a rule of thumb of technical analysis, descending triangles dissolve after the price definitively drops below the support trendline and then falls by the maximum height of the triangle. The analyst shows this in the chart below and states that Ethereum experienced a similar downward move in June.
ETH’s daily price chart with ‘descending triangle’ setup / Source: TradingView Analyst, if ETH’s price breaks below the lower trendline of the triangle, it’s about 25% down from today’s price in June He states that there is a risk of a drop to $1,350.
ETH reserves increase on exchanges
According to CryptoQuant data, the total number of Ethereum balances on crypto exchanges globally has increased by 550,459 ETH since May. That’s roughly $950 million worth of inflows into exchanges’ hot wallets since the start of the Terra fiasco.
Ethereum exchange reserves / Source: CryptoQuant Typically, traders send tokens to exchanges when they want to trade for other assets. Therefore, the analyst states that if the downward trend in ETH reserves in exchanges starts to reverse, the selling pressure will likely increase.
