Ethereum price remains in a bear market this year as the second-biggest cryptocurrency lacks a clear catalyst. The ETH coin was trading at the extreme oversold level of the Murrey Mathe Lines at $2,220, down by almost 50% from its highest level in December last year. So, is it safe to buy the ETH dip?
Ethereum price technical analysis
The daily chart shows that the ETH coin price has crashed in the past two months. After peaking a $4,088 in November last year, the coin has moved to $2,220. It has crashed slightly below the key support at $2,182, the lowest swing on February 13.
ETH price has crashed below the 50-day moving average, a sign that bears remain in control for now. It has also moved below the Ichimoku cloud indicator. There are signs that the coin has formed an inverse head and shoulders pattern, a popular bearish continuation sign.
Oscillators have continued to move downwards. The Relative Strength Index (RSI) has dropped and moved to the oversold level, while the percentage price oscillator (PPO) has moved below the zero line.
Therefore, the outlook for the Ethereum coin is bearish. Measuring the distance between the November highest point in November and the current level shows that it is about 50%. The same distance from the current level gives the next Ethereum price target at $1,125.
This bearish Ethereum price target will become invalid if the coin rises above the strong, pivot, reverse level at $2,812. A move above that level will point to more gains, with the next point to watch being at $3,500.
Ethereum price chart
Why ETH price is crashing
There are a few reasons why the ETH coin is crashing. First, there are signs that it is seeing weak demand from retail and instititutional demand. A good example of this is looking at the spot Ethereum ETF inflows and outflows data.
It has had outflows in the past seven consecutive days, moving its total inflows since inception at $2.28 and the total Ethereum ETF assets at about $8 billion. Looking at Ethereum ETF inflows and outflows data is a good indicator of demand from the US.
The same is happening in the staking market, where Ethereum ETF outflows have risen in the past few months. Ethereum has a staking market cap if $74 billion, down by almost 20% in the last seven days.
Further data shows that Ethereum balances on exchanges have risen in the past few days. They rose to 15.38 million, up from 14.9 million last month. Rising balances is a sign that investors are selling their coins by moving them to exchanges.
ETH balances on exchanges | Source: Coinglass
Ethereum futures open interest has also plunged in the past few months. It slumped to $19 billion on Sunday, down from over $30 billion last year. Therefore, this performance is a sign that demand is waning.
There are other reasons why the ETH price has crashed. For example, the drop is in sync with other cryptocurrencies have plunged in the past few months, with Bitcoin’s price falling from $109,200 to $85,000 today.
Further, the ongoing Ethereum price plunge happened as the blockchain came under strong competition from the likes of Solana and BNB. Most notably, it is seeing strong competition from top layer-2 networks like Base, Arbitrum, and Optimism.
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