Many people eagerly await a substantial Ethereum price recovery. Unfortunately, it does not appear much will change in the weeks ahead. A rising bearish sentiment trumps the fresh lows for exchange deposits.
Ethereum Exchange Deposits Dip Hard
It is interesting to see the ETH flows to exchanges decrease spectacularly. Although most Ether holders are in loss, plenty of people hold ETH in profit. One may be inclined to sell at these prices as no improvement is around the corner. If anything, a lower ETH price seems somewhat likely in the coming weeks. The Merge has had no impact on the Ether valuation, although that was partially to be expected.
Even so, there is a substantial decrease in ETH exchange deposits. The metric hit a fresh two-year low for the week. That is the same level as seen in late October 2020. It is unclear what this means for the Ether price, although a bounce remains unlikely. Many people will hold their ETH and weather the storm without relying on exchanges.
Interestingly, the number of ETH addresses sending to exchanges is at a 23-month low. That correlates with the exchange inflow dip. Seeing both metrics hit 2020 levels in late 2022 is rather significant, although it does not signal a market reversal. There is still plenty of ETH liquidity on exchanges and trading platforms. As long as outflows do not increase significantly, the price will not budge either.
Reducing ETH Supply Is A Good Thing
One thing no one can argue about is the ongoing burning of ETH. That change went into effect through EIP-1559 and continues to forge ahead at full steam. The network burns roughly 1 ETH per minute, yielding a 0.86x issuance offset. As a result, Ethereum has become a deflationary currency, even if its circulating supply remains well above 110 million ETH.
Moreover, The Merge has a positive effect on this metric. If Ethereum were still PoW, its supply would have increased by over 379,000 ETH since The Merge. However, the PoS version of the network saw just under 7,000 ETH enter circulation. The 0.07% annual supply increase is more favorable than 3.66% per year under PoW conditions.
With fewer ETH entering circulation and fewer exchange deposits, something might happen over the coming weeks. However, it seems unlikely ETH will move before Bitcoin does. For now, the outlook remains rather bleak. The social sentiment regarding ETH reflects that rather well.
Bearish ETH Sentiment Increases
Per LunarCrush, ETH has had a 5% bearish sentiment increase this past week. It may not seem like much, yet it shows how investors look at the second-largest cryptocurrency by market cap. Moreover, the bullish sentiment is down by 1.5%, although that shouldn’t come as a big surprise. Reversing the ongoing bear market is a tall order, and it will not happen anytime soon.
Furthermore, ETH saw a 45.6% increase in volatility. That is not entirely unusual, but it may hinder future price growth. Even with fewer exchange deposits, it seems unlikely ETH will break the cycle. The numbers do not look favorable, but cryptocurrencies remain unpredictable first and foremost.
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