Why is Ethereum (ETH) price down today?
Ether (ETH) price has started the new week on a bearish front after dropping by 8% on Jan. 13. The altcoin showed signs of weakness early in the Asian trading session, forming a deviation after sweeping liquidity from the previous day's high.
Ethereum 4-hour chart. Source: Cointelegraph/TradingView
Ethereum also lost its weekly support at $3,200 during the correction, pushing the price to its lowest value since Nov. 21, 2024.
Ethereum futures traders turning bearish
Ether’s drop under $3,200 triggered another significant liquidation event for the altcoin in a span of two weeks.
Ethereum’s liquidation chart. Source: CoinGlass
Over $90 million in leveraged positions were wiped out, with $77 million in longs liquidated. However, it is important to note that open interest reached a new all-time high on Jan. 7 with $32 billion, which means the futures market was predominantly bearish, with an influx of short positions built over the past seven days.
Ether OI dropped to $28 billion on Jan. 12, implying that traders were cutting their previous longs early or taking profits on their short positions from its recent high of $3,700.
Related: Why is Cardano price down today?
Ethereum has turned “inflationary” in the past 10 months
While the ETH futures market recently turned bearish, the underlying demand to hold Ethereum has declined over the past year. Benjamin Cowen, a crypto commentator and analyst, said that Ether circulation has increased by 45,000 ETH/month, and the current supply is only 32,000 short of reaching its pre-merge supply.
Ethereum supply rate and burn rate. Source: X.com
When Ethereum moved from a proof-of-work (PoW) to a proof-of-stake (PoS) consensus mechanism, the token was expected to turn deflationary due to ETH burns. However, since the beginning of 2024, ETH supply has increased faster than ETH burns. The analyst added,
“Demand has remained so low that the the supply of #ETH has been inflationary for about the last 10 months.”
Technically, there is no net inflation yet since the supply is still under pre-merge reserve. Still, prolonged periods of low demand will eventually bring the supply back above the limit once again.
Ethereum 1-day chart. Source: Cointelegraph/TradingView
From a technical perspective, Ether’s wick below $3,000 is likely a new range low. As observed in the chart, a narrow liquidity zone between $3,000 and $3,100 has been cleared, triggering a buy-side liquidity sweep.
An immediate bullish deviation from the $3,000 level on the daily chart would imply that the buyers have taken charge again. However, further weakness may drop ETH to as low as $2,800 support, including the weekly Fair Value Gap (FVG), which has been active since Donald Trump’s election win.
Related: Strongest US dollar since 2022 bear market: 5 Things to know in Bitcoin this week
This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.
Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.
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