Ethereum Faces Bearish Pressure as December Sees $545M in ETF Outflows

As December wraps up, Ethereum's price has encountered a significant downturn, experiencing nearly a 14% decline. This drop coincides with substantial net outflows from spot exchange-traded funds (ETFs), totaling close to $545 million. The pressing question now is whether this leading altcoin will continue its downward trend and confirm a bearish pennant pattern.

Key Takeaways

Ethereum's price has fallen about 14% this December, with net outflows from ETFs reaching $545 million.
Demand from institutional investors is dwindling, affecting retail investor confidence.
Ethereum futures open interest remains low, suggesting fewer speculative trades.
The prevailing market sentiment is risk-averse, exacerbated by the Federal Reserve's hawkish stance.
A bearish pennant pattern has formed, indicating potential further declines unless a breakout occurs above $3,100.

Ethereum faces bearish pressure as December sees $545M in ETF outflows.

Ethereum's Price Performance This Month

Ethereum (ETH) has seen a notable decline, dropping from a December high of $3,432 to just under $3,000 at the time of writing. This represents a steep fall of nearly 40% from its all-time high of $4,946. The downturn in Ethereum's price is primarily linked to diminishing demand from institutional investors, which in turn affects the sentiment of retail investors. According to data gathered from various sources, the nine U.S. spot Ethereum ETFs experienced significant outflows of $545 million in December, continuing a trend from November that saw $1.42 billion leave these investment products.

Lack of Demand from Derivative Traders

In addition to the waning interest from institutional investors, the activity in derivative trading has not shown signs of recovery. Data from CoinGlass indicates that the open interest for Ethereum futures has remained stagnant within the $35 to $40 billion range, a stark decrease from the $70 billion recorded in August. This declining open interest suggests that traders are reducing their positions and are hesitant to place new bets on price fluctuations, which does not bode well for speculative interest in Ethereum.

Market Sentiment and Technical Indicators

The broader market sentiment remains cautious. This risk-averse attitude among investors is largely influenced by the Federal Reserve's strict monetary policy, which has pushed many investors towards safer assets, distancing them from riskier investments like Ethereum. As of this writing, the Crypto Fear and Greed Index indicated extreme fear in the market, with a reading of 21. Such low readings often lead to suppressed prices for cryptocurrencies like Ethereum.

Technical Analysis: Bearish Pennant Formation

Currently, Ethereum's price action has established a bearish pennant pattern on the daily chart. This formation typically appears after a sharp decline and is interpreted by traders as a signal for further downside potential. The presence of a 'death cross'—a situation where the 50-day simple moving average has crossed below the 200-day moving average—further supports a bearish outlook for Ethereum.

At this juncture, Ethereum is also trading below its 50-day moving average, indicating that downward momentum persists and that buyers are struggling to regain control of the market. Additionally, the Supertrend indicator has turned red, which many traders view as a signal to sell, reinforcing the likelihood of further losses.

Outlook for Ethereum's Price Action

If the bearish pennant pattern is confirmed, Ethereum may risk dropping to its November 21 low of $2,622, especially since there appear to be no significant support levels in between. Conversely, a breakout above the immediate psychological resistance mark of $3,100 could invalidate the bearish setup, allowing for a potential short-term recovery for the altcoin.

Ethereum price has formed a bearish pennant pattern on the daily chart — Dec. 31 | Source: crypto.news