Ethereum’s price has been in a slump recently, slipping more than 15% in the past week amid bearish momentum in the overall crypto space. Ethereum’s current struggles are mainly driven by a return to inflationary supply levels. Since April 2024, the network’s supply has been increasing, which is the opposite of the deflationary environment it experienced after the Merger.
Ethereum’s Price Outlook
The total supply has risen by 0.37% in the past nine
months, reaching 120.4 million ETH. This increased supply, coupled with lower
demand, has fueled concerns about the asset’s price trajectory.
On the 4-hour chart on TradingView, Ethereum has dropped below the
$3,087 support level in a clear downtrend. The critical question for investors
now is whether Ethereum can maintain this support level, with failure to hold
above the support could lead to further declines.
Additionally, the price is below the 50 and moving
averages. However, ETH’s Relative Strength Index (RSI) is at the oversold
territory of 22, meaning there is a possibility of price reversing before a
further downward momentum can be seen.
Ether’s price had remained in a consolidation, trading
between a low of $3,189 and a high of $3,330 before the price dipped to the current
level. On the daily chart, RSI is close to the oversold zone at 32, with the price
currently above the 50-moving average.
On the longer time chart, price had been on a downward
trend on the weekly chart since touching a high of $4,010 in December 2. A
notable development is the recent drop in funding rates, which suggests
increasing bearish sentiment among traders.
On-Chain Metrics
However, as Ethereum nears the $3,000 support zone,
funding rates have begun to show signs of recovery, indicating that some
traders are opening long positions in anticipation of a rebound, data from
CryptoQuant shows.
If these funding rates continue to recover, it could
signal the start of a bullish phase for Ethereum. However, if the recovery
falters and the bearish sentiment intensifies, further downside risks remain. Ethereum’s price is at a crossroads, with its fate
likely tied to whether it can regain momentum.
This article was written by Jared Kirui at www.financemagnates.com.
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