Ethereum Stalls Despite Strong ETF Inflows and Low Exchange Reserves

Ethereum’s price remains stagnant around $2,600 despite significant ETF inflows and a drop in exchange reserves. With a record low of 18.65 million ETH in exchange reserves, rising short positions in futures have complicated the bullish sentiment. Technical indicators also show weakening momentum as Ethereum faces resistance in its current pricing trend.

Ethereum (ETH) is currently priced at around $2,600, showing signs of stagnation. This comes despite significant inflows into Ethereum ETFs and a drastic decrease in exchange reserves. In fact, US spot Ethereum ETFs have observed 12 straight days of net inflows, amounting to $743.8 million. However, the rising short positions in ETH futures could be offsetting the buying momentum seen in the market.

The streak of inflows for US spot Ethereum ETFs extended to twelve days, with Tuesday alone witnessing net inflows of $109.43 million. This marks the second-highest inflow since early February. Particularly noteworthy is BlackRock’s iShares Ethereum Trust (ETHA), which led with a significant $77 million inflow on Tuesday. Since May 11, this product has amassed 214,000 ETH as per data from the blockchain tracker Lookonchain.

Meanwhile, Ethereum’s exchange reserves have drastically dropped, with nearly 450,000 ETH withdrawn in just a week. The exchange reserves saw a decrease to an all-time low of 18.65 million ETH, a level unnoticed since its launch period in 2016. A good chunk of these withdrawals appears to be moving towards staking protocols, as indicated by 255,000 ETH being staked in the past eight days.

Adding to the dynamics, over 306,000 ETH are now languishing in the validator activation queue—the highest in over a year—while another 340,000 ETH are in the entry queue facing a wait time of more than five days. Thus, despite all these bullish signals, Ethereum’s price has mostly traded sideways from May 13, oscillating between $2,450 and $2,700.

Critically, the increasing short positions within Ethereum futures present a puzzling scenario. US hedge funds on the Chicago Mercantile Exchange (CME) have ramped up their short positions in recent weeks to $1.25 billion, which outweighs the long positions according to CFTC data. This trend can also be observed on Binance, where short positions are rising to levels reminiscent of February before a market collapse.

Investors are potentially using ETH ETFs and staked ETH in a delta-neutral strategy, essentially hedging through shorts while benefiting from staking rewards or price premiums. It’s quite a strategic play considering the market dynamics.

Over the past day, Ethereum faced $52.39 million in futures liquidations, split between $26.95 million in long positions and $25.44 million in shorts. As for technical analysis, ETH bounced off its 50-period Simple Moving Average (SMA) while retesting an upward trendline from May 18. If ETH cannot break through this trendline and the key $2,750 resistance, it might find some support near the $2,500 level depending on the aforementioned SMA’s performance.

Indicators like the Relative Strength Index (RSI) and Stochastic Oscillator are currently above neutral but trending down. This suggests that bullish momentum is weakening rather than strengthening. Traders and investors are advised to stay alert and conduct careful assessments as market conditions evolve.