The Ethereum Foundation has previously conducted large sales of Ether (ETH), with some instances coinciding with bear markets. However, minimal evidence suggests that these sales directly affect general market trends. CryptoMode will examine the Foundation’s recent transfer to the Kraken cryptocurrency exchange and its implications on Ether’s price and the overall market.
The Ethereum Foundation Transfers $30 Million
On May 6, the Ethereum Foundation sold nearly $30 million worth of Ether via the Kraken cryptocurrency exchange. This transfer sparked concerns about a potential selloff event in the market. As a result, Ether’s price fell by 4.8% to $1,900 on the same day. Despite the decline, Ether’s price has shown resilience amid a broader recovery trend, modestly recovering to $1,920 on May 7.
Following the transfer, Ether’s price tested its 50-day exponential moving average (50-day EMA) near $1,850 as support. Additionally, price volatility on Kraken decreased during this period, as illustrated by contracting Bollinger Bands width. This decrease in volatility demonstrates trader’s calm in response to the Ethereum Foundation’s transfer.
The 50-day EMA has historically limited Ether’s downside attempts in 2023, except the early March selloff. Testing the 50-day EMA as support has typically led to Ether’s price breaking out above $2,000.
ETH Bulls vs. Bears: Potential Price Movements and Support Levels
With the 50-day EMA acting as a strong support level, ETH bulls may attempt to push the price above $2,000 again. However, if the price drops below the 50-day EMA, traders may consider a support confluence comprising a multi-month ascending trendline and the 200-day EMA (the blue wave) near $1,700 as the next downside target. That represents a potential 13% decline from current price levels.
Despite the possibility of a larger decline, Ether would still maintain its overall recovery trend, as measured from its June 2022 bottom of $880.
A rising exchange balance typically indicates an increase in potential selling pressure. However, in the case of Ethereum, the balance across all exchanges remained lower, even after the Ethereum Foundation’s $30 million transfer to Kraken. For example, Kraken’s Ether balance increased only slightly from 1.83 million to 1.84 million ETH on May 6.
Furthermore, the balance across all exchanges dropped to 18.15 million ETH from 18.22 million ETH, suggesting that the market can easily absorb any potential sell pressure from the Ethereum Foundation.
Historical Perspective: Ethereum Foundation’s Large ETH Sales and Market Impact
The Ethereum Foundation conducted significant ETH sales previously, such as the 20,000 ETH transfer in November 2021 and the 35,053 ETH sale in May 2021.
In both instances, the price of Ether declined substantially after the transfers. However, there is little evidence to suggest that the Ethereum Foundation’s sales directly impact Ether’s price trend.
For instance, large ETH sales also occurred during the 2020-2021 bull cycle, which was fueled by growing demand for risk-on assets in a low-interest rate macro environment.
The Role of External Factors in Ethereum’s Price Trend
Instead of focusing solely on the Ethereum Foundation’s transfers, it is crucial to consider the broader context of the cryptocurrency market. Currently, the market is taking cues from the U.S. banking crisis and the possibility of the Federal Reserve halting interest rate hikes and cutting interest rates.
While the Ethereum Foundation’s large transfers of Ether have coincided with bear markets in the past, there is insufficient evidence to prove that these sales directly influence general market trends. For example, the recent transfer to the Kraken cryptocurrency exchange caused a temporary decline in Ether’s price, but the cryptocurrency has demonstrated resilience amidst a wider recovery trend.
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