Ethereum (ETH) Could Be Ripe for a Comeback as Spot ETF Inflows and Exchange Balances Drop

Ethereum has retreated for two consecutive weeks as concerns about weak demand and falling market share remain.

Cryptocurrency prices have fallen sharply in recent months amid concerns about weak demand and falling market share.

Ethereum (ETH), the world’s second-largest cryptocurrency by market capitalization, has dropped to a low of $2,140 this week. It bounced back to $2,620 as the crypto industry stabilized.

However, ETH remains about 37% below its highest level in December last year.

Solana (SOL) has emerged as a formidable rival to Ethereum, especially in the decentralized finance (DeFi) space.

According to DeFi Llama, Solana’s 30-day trading volume reached $264 billion, significantly higher than Ethereum’s $95 billion.

Solana has also overtaken Ethereum in terms of network fees this year. Data from Token Terminal shows that Solana has generated $400 million in fees, making it the third-most profitable cryptocurrency project after Tether (USDT) and Tron (TRX).

Meanwhile, Ethereum has collected about $172 million in fees, ranking sixth among major crypto projects.

Rising controversies at the Ethereum Foundation and token dumps by early investors have also contributed to the coin’s price decline.

Despite the challenges, several factors could set the stage for a potential Ethereum comeback.

One key catalyst is the continuing inflows into spot Ethereum ETFs. According to SoSoValue, these funds have experienced net inflows for six consecutive days, totaling $3.17 billion.

This strong buying activity by Wall Street investors indicates increasing demand for these funds. However, spot Ethereum ETFs still lag behind Bitcoin (BTC) in terms of inflows, with the latter accumulating over $40 billion.

Another positive sign for ETH is the declining balances on cryptocurrency exchanges, which could indicate accumulation by investors.

Data from CoinGlass shows that ETH balances on exchanges have fallen to 15.36 million, down from 16.1 million earlier this year. These balances have reached their lowest level since December last year.

The decrease in on-exchange ETH holdings coincides with a rise in activity in the over-the-counter (OTC) market. Large institutions often engage in OTC activity to execute substantial transactions outside centralized and decentralized exchanges.

An examination of the weekly chart reveals that the price of ETH has dropped significantly, reaching a low of $2,140 this week. This marks the lowest level since August of last year.

The price action has formed a hammer pattern on the weekly chart, characterized by a longer lower shadow and a small body, widely recognized as a bullish reversal sign.

Interestingly, a similar pattern occurred in August when ETH bottomed at $2,139. Both substantial drops occurred during periods of high bearish volume spikes.

Additionally, ETH has found support at the 200-week moving average, which could indicate a potential bounce back from these lows.