Ethereum Encounters Selling Pressure Even as Supply Remains Locked

Ethereum is currently facing a tough market phase, with its price experiencing continuous selling pressure despite a tightening supply situation. On the charts, ETH reveals signs of weakness as it repeatedly hits key resistance levels and shows declining momentum—a clear indication that sellers are dominating in the short term. A large portion of the ETH supply remains locked in staking contracts, effectively decreasing the liquid ETH available in the market.

Key Takeaways

Ethereum is currently experiencing persistent selling pressure while the supply of liquid ETH is shrinking due to increased staking.
Nearly 3 million ETH is queued for staking, with an entry wait time of about 50 days and minimal withdrawals occurring.
A significant amount of ETH (over 38 million) is staked, indicating strong network participation despite price weaknesses.
Hedge funds have recently reduced their long positions in ETH, adding to selling pressure, while other investors remain more neutral.
The current environment features a notable disparity between long and short positions, with short positions significantly outweighing longs.

In summary, Ethereum's market dynamics are influenced by both selling pressure and significant locked supply, presenting a complex but intriguing landscape for investors.

Supply Locking Influences Circulating Ethereum Levels

Ethereum is seeing pressure on its price charts, but an increasing amount of supply is getting locked away through staking. Analyst Sjuul AltCryptoGems on X has revealed that nearly 3 million ETH is currently awaiting staking, with the entry queue extending to approximately 50 days.

Conversely, the exit queue is nearly empty, suggesting that very few individuals are withdrawing their holdings—highlighting a distinct imbalance. If confidence were low, we would observe a rise in exit activity and a decrease in staking demand; however, the current scenario is the opposite.

Ethereum
Source: Chart from Sjuul AltCryptoGems on X

Investors continue to lock their ETH for months, earning a yield of around 2.7%. The total amount staked has surpassed 38 million ETH, which represents over 31% of the total supply, and this number keeps increasing despite a downward price trend. This dynamic reveals a key trend: while the ETH price is demonstrating weakness, network participation indicates strength. There are lengthy waiting times for new staking entries but minimal wait to exit. Such disconnection typically doesn’t persist for long; presently, supply is being locked away while demand is on the rise.

Changes in Ethereum Long and Short Positions

The recent drop in Ethereum’s price may stem largely from changes in positioning among hedge funds. Crypto investor CW notes that hedge funds significantly cut their long ETH positions around two weeks ago, especially on Coinbase Derivatives. This suggests many have either liquidated their holdings or exited their trades to mitigate losses.

This wave of unwinding long positions has created added selling pressure, with US hedge funds acting as the primary force currently influencing the market. This shift in sentiment stands in contrast to other market participants, as dealers and asset managers are generally neutral or still maintain a slight edge in long positions. CW posits that a significant rally may begin only when hedge funds become bullish again.

Both long and short positions in Ethereum have decreased compared to the previous day. CW observes that high-leverage long positions are approximately $1.1 billion, while short positions notably outweigh them at about $4.22 billion. However, if the ETH price increases by $100, many short positions would likely be liquidated.

Ethereum
ETH trading at $2,040 on the 1D chart | Source: ETHUSDT on Tradingview.com