Ethereum has found itself at a precarious intersection as the cryptocurrency grapples with a challenging market environment. Following a substantial outflow of $20 billion from the decentralized finance (DeFi) sector, ETH is currently testing the resilience of its $3.2K support level.
Recent trading activity indicates that Ethereum may not have hit its bottom just yet. The cryptocurrency opened November by breaking through critical price levels, suffering a 7.78% decline that prevented it from establishing $3.8K as a new support. This was compounded by an additional drop of 8.80%, with ETH struggling to maintain a price above $3.5K. Such movements resulted in two consecutive lower lows within a single week, typically indicative of a bearish market structure.
The aftermath of these back-to-back declines has left Ethereum in a vulnerable position. The market witnessed another flash crash on November 3rd and 4th, leading to a $2 billion liquidation event. While this was minor compared to the earlier $20 billion wipeout seen in mid-October, the negative sentiment was palpable. During this period, ETH fell by 15% to $3.05K, further solidifying its weakened state.
Looking back at the October crash, Ethereum experienced a three-week consolidation period, where it attempted to retest $3.8K multiple times. Bulls strove to reclaim the pre-crash level of $4.3K, but persistent selling pressure undermined their efforts, resulting in a fragile market structure with no significant follow-through.
As it stands, the $3.2K floor remains tenuous. Despite Ethereum”s stablecoin supply reaching an all-time high, which could typically signify increased liquidity, the lack of fear of missing out (FOMO) suggests that investor conviction is low. This paradox raises questions about whether the current environment will facilitate a recovery.
Moreover, while liquidity is reportedly increasing, Ethereum”s bulls have yet to capitalize on this influx. The total value locked (TVL) in DeFi has decreased by approximately $20 billion over the past month, indicating a withdrawal of funds or a preference to remain on the sidelines. Even with a record volume of stablecoins, the market is characterized by thin bids and an overall fragile structure.
On the derivatives front, Ethereum”s Open Interest has not undergone the same level of erosion as seen in October, decreasing by $5 billion compared to a $15 billion decline previously. This suggests that while liquidation pressure is reduced, the market remains susceptible to short-term squeezes driven by the thin bid landscape.
Furthermore, many HODLers are experiencing realized losses, with Ethereum”s net profit/loss metrics indicating a significant downturn. On November 4th, the realized profit/loss for ETH reached -$626 million, marking an eight-month low. This data reinforces the notion that Ethereum has not significantly diverged from its post-crash scenario in October.
In summary, despite liquidity inflows, the absence of strong buying conviction and the fragility of the $3.2K support level raise concerns about Ethereum”s ability to stage a meaningful recovery. The current market dynamics suggest that until there is a convincing shift in sentiment, ETH”s stability remains in jeopardy.
