Ethereum Supply Is Shrinking: So Why Is ETH Stuck Below $3,390?

Summary:
Despite a notable decrease in Ethereum's available supply, the price of ETH has remained stagnant below $3,390. Large institutions are actively stashing ETH, but market reactions are cautious. Enthusiasts and traders alike must navigate this complex landscape where accumulation isn't yet driving a price increase.

Key Takeaways

Ethereum’s supply continues to decrease with significant institutional accumulation.
Despite this, the price remains stuck due to selling pressure around the $3,390 mark.
The market shows mixed signals with some consolidation and hesitance among traders.
A clear breakout above resistance is necessary for a potential price increase.

Ethereum supply keeps shrinking, so why is price still stuck?

Current Supply Dynamics of Ethereum

Large institutions are consistently withdrawing Ethereum [ETH] from circulation, and this trend appears to be growing. Recently, Bitmine staked 86,848 ETH, valued at approximately $277.5 million, raising its total staked assets to 1.77 million ETH, or about $5.66 billion. Furthermore, exchange-traded funds (ETFs) have accumulated 158,545 ETH, amounting to roughly $520 million since late December. This gradual accumulation reduces the market supply each day.

Nevertheless, the price has not reacted as one might expect. Long-term holders seem to focus more on yield and custody, rather than short-term fluctuations, which leads to a noticeable gap between accumulating assets and the price's immediate response. As of now, patience is key for investors and traders alike.

What’s Capping Ethereum's Price at $3,390?

Ethereum is currently trading within a well-defined range, and sellers remain dominant around the $3,390 marker. Whenever the price rallies towards this area, it faces fresh selling pressure. While buyers are managing to uphold levels around $3,000, pushing beyond this barrier has proven challenging. Consequently, the price tends to oscillate rather than trend upwards. This repeated rejection from $3,390 indicates caution, rather than an indication of weakness.

Sellers are protecting key price levels but are not pursuing aggressive action afterwards. Meanwhile, buyers are cautious and selective instead of going all-in on a potential rally, leading to a compression range. For market sentiment to shift, a significant break above the resistance level is essential. Until such a break occurs, the price action is expected to remain constrained.

Momentum indicators, such as the Relative Strength Index (RSI), support this consolidation narrative. At the time of writing, the RSI has declined from the low 50s to the mid-40s, reflecting diminishing buying strength after each rebound. Notably, the RSI does not exhibit bullish divergence, suggesting that momentum does not affirm a potential breakout.

Ethereum price action
Source: TradingView

Persistent Ethereum Outflows from Exchanges

Analytics on spot flow display a positive trend beneath the surface. Ethereum is experiencing steady outflows from exchanges, with the latest net flow approaching -$72.6 million. Traders and long-term holders are increasingly opting to transfer ETH to self-custody, which continues to diminish the available supply in the market.

Nonetheless, the price isn't responding immediately to these outflows, leading to frustration among short-term traders. Historically, consistent outflows often signal potential price movements driven by reduced supply. On the flip side, sellers are failing to force significant downtrends. As a result, Ethereum’s price appears stable despite a lack of momentum, indicating strong conviction among holders rather than fear. Over time, this trend may further tighten available supply.

Ethereum exchange flow analytics
Source: CoinGlass

Funding Rate Insights

The derivatives market is emitting signals of hesitance rather than confidence. As of now, funding rates remain positive, close to 0.0042, which is a significant rebound from previously depressed levels, showing an increase of about +1,900.87%. This uptick indicates that leverage has returned to some extent; however, the absolute levels are still modest. Long positions are paying shorts, but this process does not show intensity.

Consequently, leverage participation remains cautious, and traders appear disinclined to aggressively pursue upside opportunities. On a positive note, funding has not turned negative, which suggests that bearish sentiment is also lacking conviction. The absence of a substantial increase in funding limits the potential for Ethereum to break out of its ongoing consolidation phase.

Ethereum Funding Rates - All Exchanges
Source: CryptoQuant

Ethereum finds itself caught between strong structural accumulation and weak short-term sentiment. Institutions continue to secure ETH supply, but momentum and leverage have not yet confirmed any significant upward moves. Given the current lack of strong funding and subdued RSI levels, prices are likely to continue consolidating.

A decisive breakthrough above the $3,390 resistance, supported by increased momentum, could be the signal that tightening supply is starting to impact prices positively.

Concluding Thoughts

The Ethereum landscape is complex, with institutional investment solidifying supply but retail traders experiencing mixed signals in momentum and price action. Investors are keenly watching for a breakout to signify changing conditions in the market.