The price of Ethereum has experienced a notable decline of nearly 14% in December, coinciding with significant outflows from exchange-traded funds (ETFs) amounting to approximately $545 million. As the month closes, the market is left questioning whether this leading altcoin will continue its downward trajectory, especially as it approaches the confirmation of a bearish pennant pattern.
According to data sourced from crypto.news, Ethereum (ETH) has dropped from its December high of $3,432 to just below $3,000 at the time of writing. This downturn is even more pronounced when considering the broader context, with the current price nearly 40% lower than its all-time peak of $4,946.
The primary driver behind Ethereum“s slump this month appears to be diminishing interest from institutional investors, which has also adversely affected retail sentiment towards the cryptocurrency. Data from SoSoValue reveals that nine U.S. spot Ethereum ETFs have collectively lost around $545 million during December, following a similar trend that saw $1.42 billion exit these investment products in November.
Further complicating the situation, demand from derivative traders has not shown signs of recovery. Insights from CoinGlass indicate that Ethereum futures open interest has remained stagnant in the $35 to $40 billion range, a significant drop from the $70 billion seen in August. This decline in open interest suggests that traders are unwinding their positions and scaling back their speculative activities, potentially making the asset less appealing.
The prevailing risk-off sentiment in the market has further weighed on Ethereum“s price action. Investors are exhibiting caution in response to the Federal Reserve“s hawkish outlook for the upcoming years, leading many to pivot from riskier assets like Ethereum to more secure alternatives. Additionally, the Crypto Fear and Greed Index currently registers a reading of 21, indicating an environment of extreme fear among investors, which has been a consistent theme throughout December.
On the technical front, Ethereum“s price chart is signaling bearish trends, with a clear formation of a bearish pennant pattern. This pattern, which typically indicates a continuation of a downward trend after a brief consolidation, is often interpreted by traders as a precursor to further declines. If confirmed, the bearish pennant could lead to a drop toward the November 21 low of $2,622, especially as there seems to be a lack of significant support levels in between.
Moreover, technical indicators support a bearish perspective with the 50-day simple moving average crossing below the 200-day average, a phenomenon known as a death cross. Ethereum is currently trading below the 50-day moving average, signifying that downward momentum remains strong and that buyers are struggling to regain dominance in the market.
Additionally, the Supertrend indicator has turned red after moving above the current price level, which traders often interpret as a signal to sell or short the asset, reinforcing the potential for further losses. Conversely, a breakout above the psychological resistance level at $3,100 could invalidate the bearish outlook, potentially paving the way for a short-term recovery.
