Bearish Signal: Ethereum Exchange Balances Touch 3-Month High
Ethereum had seen its balances on exchanges decline through 2021. This happened despite continuous market rallies that sent the digital asset towards all-time highs. Investors had accumulated all through bull rallies instead of trying to dump their coins, leading to reduced supply on centralized exchanges. This was also propelled forward by the growing popularity of DeFi. However, this trend is starting to reverse as exchange balances are now on the rise.
Ethereum Exchange Balances Touch 3-Month High
New on-chain reports have shown that Ethereum exchange balances are on the rise once more. After reaching one-year lows in 2021, exchange inflows have begun to pick up, seeing balances rise to three-month highs.
Related Reading | Ruby on Rails Creator Backtracks As He Expresses Support For Crypto
Data from Glassnode shows that this number is down by more than 700,000 ETH from its December lows. This metric which has been inversely correlated with the price of the digital asset has continued into the new year. Whereas exchange balances had plummeted as the cryptocurrency had seen its price surge, the same balances are growing with the current downtrend.
#Ethereum $ETH Balance on Exchanges just reached a 3-month high of 14,715,388.749 ETH
Previous 3-month high of 14,714,748.847 ETH was observed on 21 February 2022
View metric:https://t.co/1dCpD2ey8E pic.twitter.com/TQHqaM3OOi
— glassnode alerts (@glassnodealerts) February 22, 2022
With the continuous decline of Ethereum, investors are starting to sell off their holdings to avoid losses. This has resulted in large inflows in exchanges. On February 21st, the number of ETH left on exchanges hit 14,714,748.847. If the trend continues, then more ETH may end up on centralized exchanges, which are more likely to be sold off by investors after a long stretch of accumulation.
How ETH Has Reacted
Ethereum has reacted as expected to this new metric. In cases where centralized exchange balances are declining, it signals that investors are not ready to sell, hence the value is on the rise. However, once investors start moving their holdings to exchanges, it shows they are willing to sell, and large sell-offs will negatively affect the price of the digital asset.
ETH trading above $2,600 | Source: ETHUSD on TradingView.com
With the recent decline, Ethereum has slipped below its 100-day simple moving average to be trading at six-month lows. This means investors are less willing to purchase the digital asset at prices they have for the last couple of months.
Related Reading | Crypto Winter or Not, Here’s Why Index Trading Can Help Spread the Risk
Sentiment has also skewed greatly towards sell with a 72% majority. The cryptocurrency also shows strong sell sentiments across short, medium, and long-term indicators, meaning sell-offs are likely to continue.
The next resistance point for the digital asset lists at $2,748 but with the current trajectory, it is more likely that ETH will touch its 1st support level of $2,496 before reversing to test this resistance point. However, crypto is always unpredictable and ETH could very well start another recovery trend before touching below $2,500.
Featured image from News18, chart from TradingView.com