Ether (ETH) Price Starts the New Week on a Bearish Front After Dropping by 8% on Jan. 13

The altcoin showed signs of weakness early in the Asian trading session, forming a deviation after sweeping liquidity from the previous day's high.

Ether (ETH) price began the new week on a bearish note following an 8% drop on Jan. 13. The altcoin showed signs of weakness early in the Asian trading session, forming a lower deviation after sweeping liquidity from the previous day's high.

Ethereum also lost a weekly support level at $3,200 during the correction, pushing the price to its lowest value since Nov. 21, 2023.

Ethereum futures traders turning bearish

Ether's drop below $3,200 triggered another large liquidation event for the altcoin within a two-week period.

Over $90 million in leveraged positions were wiped out, of which $77 million was in longs. Interestingly, open interest reached a new all-time high on Jan. 7 at $32 billion, which suggests that the futures market was predominantly bearish, building an influx of short positions over the past seven days.

As traders closed their previous longs early or booked profits on their short positions from the recent top at $3,700, Ether OI dropped to $28 billion on Jan. 12.

Ether OI dropped to $28 billion on Jan. 12.OI rates are displayed on a logarithmic scale.Source: Coinglass

Related: Why is Cardano price down today?

Ethereum has turned “inflationary” in the past 10 months

As the ETH futures market recently turned bearish, the underlying demand to hold Ethereum has declined over the past year. According to Benjamin Cowen, a crypto commentator and analyst, Ether circulation has increased at a rate of 45,000 ETH/month, and the current supply is only 32,000 short of reaching its pre-merge supply,

When Ethereum transitioned from a proof-of-work (PoW) to a proof-of-stake (PoS) consensus mechanism, the token was expected to turn deflationary because of ETH burns. However, since the beginning of 2023, ETH supply has increased faster than ETH burns, leading the analyst to add the following observation:

"Technically, there is no net inflation yet since the supply is still under pre-merge reserve. Still, prolonged periods of low demand will eventually bring the supply back above the limit once again."

From a technical perspective, Ether's wick below $3,000 is likely forming a new range low. As observed in the chart, a narrow liquidity zone between $3,000 and $3,100 was cleared, triggering a buy-side liquidity sweep.

An immediate bullish deviation from the $3,000 level on the daily chart would imply that the buyers have taken charge again. However, further weakness may drop ETH to as low as the $2,800 support, including the weekly Fair Value Gap (FVG) that has been active since Donald Trump's election win.

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This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.