ETH Whales Sold the Top, but New Inflows Suggest a Bounce-Back Is Coming

After experiencing a bullish run during the first few days of 2024, ETH price encountered a setback on Tuesday with a flash crash that resulted in a loss of around 8.3%. Upon closer examination, the crash appears to be a liquidity shakedown.

Despite the initial rally, the crash on Tuesday wiped out the gains achieved earlier in the week. The sharp pullback had all the makings of a liquidity shakedown.

For instance, whale activity showed outflows since late December and into the first week of January, even as the price moved up.

Before the rally, ETH price action showed some consolidation in the last week of December, indicating directional uncertainty.

However, the uptick that followed provided some conviction about the cryptocurrency’s direction. As a result, appetite for leverage created an opportunity for long liquidations.

The return of sell pressure led to $166.45 million in long liquidations over the last 2 days. Such liquidations are common, especially during periods characterized by excitement and a strong appetite for leverage.

Unsurprisingly, Ethereum’s estimated leverage ratio has been rising steadily over the last few months. It peaked at a new all-time high on Friday last week, which was quickly followed by a spike in long liquidations.

Although ETH began the year with bullish momentum, it was the opposite for whales as they booked their profits.

This signaled a short-term outlook, which also increased the chances of a retracement. Outflows from whale addresses were seen in the form of a sharp dip in IntoTheBlock's large holder netflows indicator.

However, the latest large holder inflow and outflow data shows that inflows were higher than outflows.

ETH inflows on 7 January peaked at 519,620 ETH, while outflows on the same day totaled 411,300 coins. This resulted in a net gain for the cryptocurrency, indicating higher demand and less sell pressure from the whale category at recent lows.

Could this mean that ETH is finally set to rally again? The return of whale demand suggests that price might find support between $3032 and $3221.

A bounce-back from this range may not necessarily indicate the start of a major rally.

Can ETH Price still rally above $10,000 in 2025?

Recent supply and demand characteristics point to a temporary return to short-term price swings. Nonetheless, the long-term outlook is still positive.

One of the main reasons for optimism is the upcoming shift to a pro-crypto administration in the U.S. This development is expected to have far-reaching implications in the crypto market, especially regarding regulations.

Another major development that could supercharge ETH adoption is on the horizon. The Ethereum network is set to undergo a major upgrade called Pectra.

Early details of the Pectra upgrade reveal that there will be improvements to staking, including increasing the validator staking cap to 2048 ETH from the current 32 ETH. The enhancements will also extend to scalability and staking, with plans to include staking rewards to boost participation. These changes could potentially enhance ETH's attractiveness in the long run.