4 metrics suggest Ethereum price is sinking toward $2,300
Ethereum (ETH), the second-largest cryptocurrency by market capitalization, has experienced a turbulent week, with its price struggling to maintain recent gains. After hitting $2,768 on Oct. 21, a series of market indicators have signaled a potential bearish turn, with Ethereum's price forecasted to drop to the $2,300 zone. Multiple factors, including increased exchange supply, weakening technical signals, and reduced network activity, suggest that Ethereum price could face a significant downturn.
Several key metrics are pointing toward a bearish outlook for Ethereum in the coming days. These metrics not only reflect investor sentiment but also the current supply-demand dynamics in the market. Let’s take a closer look at the factors influencing this potential drop.
Increased ETH Supply on Exchanges
One of the strongest bearish signals comes from the increasing supply of Ether on exchanges. According to CryptoQuant data, Ether balances on centralized exchanges have reached a four-week high of 15.8 million ETH as of Oct. 21. This surge in supply indicates that more investors may be transferring their assets from self-custody wallets to exchanges with the intent to sell.
"When we see a rising supply of ETH on exchanges, it typically signals that investors are preparing to liquidate their holdings," explains CryptoQuant. This influx of supply has caused concern among traders, as it could put downward pressure on prices. Historically, an increasing supply of cryptocurrency on exchanges correlates with a decline in price as sell-side liquidity rises.
This trend reflects a lack of confidence among Ethereum holders, contributing to the overall bearish outlook.
Weakening ETH Technical Indicators
In addition to supply metrics, technical indicators for Ethereum have also shown signs of weakness. The ETH Coinbase Premium Index, which compares Ethereum’s price on Coinbase Pro to Binance, has dropped below its 14-day simple moving average (SMA). Currently, the index stands at -0.075, while the 14-day SMA is at -0.040.
The ETH Coinbase Premium Index is often viewed as an indicator of U.S. investor demand relative to global interest. When this index falls below its SMA, it indicates an increasing level of selling pressure, particularly in the U.S. market.
"ETH Coinbase Premium Index crosses below its SMA14, signaling increased U.S. selling pressure, potentially leading to price declines," says a CryptoQuant analyst. The 6.5% drop from the recent high of $2,768 to current levels supports this outlook, suggesting that sellers currently have the upper hand.
Moreover, the bearish pattern on Ethereum's daily chart, including an inverted V-shaped formation, points to a potential further decline of around 9.7%, bringing the price to the $2,300 demand zone. This pattern indicates that after a brief recovery to $2,768, bears booked profits, which could drive prices lower in the coming days.
Ethereum’s Decreasing Total Value Locked (TVL)
Ethereum's total value locked (TVL) in decentralized finance (DeFi) protocols has also shown a notable decline, adding to concerns about the network's ability to maintain its dominance in the DeFi space. The TVL on the Ethereum network dropped significantly since reaching a peak of $66 billion in June 2023, falling 57% to $42.3 billion by August. Despite a slight recovery to $48 billion, Ethereum’s TVL continues to underperform compared to other leading layer-1 protocols.
According to DefiLlama, Ethereum’s TVL has decreased by 2% over the past month, while competing blockchains such as Solana have seen a 22% increase in TVL during the same period. The declining TVL reflects Ethereum’s struggle to attract new users and projects, partly due to the network's higher transaction fees.
Ethereum’s average transaction fees remain high at 11.492 gwei, or approximately $0.62, compared to Solana’s average fee of 0.000091 SOL (~$0.015). The higher fees on Ethereum present a barrier for new projects, particularly those seeking more cost-effective platforms for decentralized applications and smart contract deployment.
Key Levels to Watch
While the metrics mentioned above paint a bearish picture for Ethereum’s price, there are still key technical levels that could offer some support or lead to a reversal. On the upside, traders will be keeping a close eye on the 200-day exponential moving average (EMA) at $2,660, which could serve as a strong resistance level. Should Ether break above this level, it could revisit its recent high of $2,768, although this scenario currently seems less likely given the prevailing bearish indicators.
The relative strength index (RSI), a key momentum indicator, has also fallen from 67 to 52 over the past few days, further supporting the case for a potential decline in Ethereum price. As market sentiment continues to shift toward the downside, investors will need to remain cautious.
Conclusion
In conclusion, Ethereum is facing a potential drop to $2,300 as several key metrics point to increasing selling pressure and weakening network activity. Rising exchange supply, a declining TVL, and bearish technical indicators are combining to create a challenging outlook for the cryptocurrency. While there are still important levels of support, the general trend suggests that Ethereum price could see further downside in the near term.
Investors should be prepared for heightened volatility and closely monitor market developments as Ethereum’s price trajectory unfolds. As the cryptocurrency space remains dynamic, both bulls and bears will need to stay informed to navigate the ongoing shifts in market sentiment.
