Source: Cointelegraph Original: "{title}"

The recent sell-off of Ethereum has caused it to lose the critical support level of $1,500, with multiple technical indicators suggesting that Ethereum may experience a deeper correction before starting a sustained rebound.

Data shows that Ethereum's price has fallen below its realized price—an on-chain metric that recalculates the market value of the cryptocurrency based on the price at which each coin was last transferred on the blockchain.

According to analysis by CryptoQuant contributor theKriptolik, when Ethereum's price is below this metric, it is typically a bearish signal. When the realized price is above the spot price, it usually acts as a resistance level and puts "most holders suddenly in a loss," the analyst stated.

The analyst also added, "Falling below the realized price typically marks a capitulation phase, where investors lose confidence and begin to sell off massively."

Realized price of Ethereum accumulation addresses. Source: CryptoQuant

In June 2022, Ethereum's realized price fell below the spot price, and subsequently, after the Terra Luna market crash, Ethereum's price plummeted by 51%. A similar situation occurred in November 2022, when the realized price fell below the spot price, leading to a 35% drop in Ethereum after the FTX collapse.

Now, a similar situation is unfolding, with the current market trend resembling previous bearish continuation phases, putting ETH's price at risk of a deeper correction.

Weak Fund Flows for Spot Ethereum ETFs

Spot Ethereum ETFs continue to show weakness, with a net outflow of over $3.3 million on April 8. In fact, over the past two weeks, these investment products have seen outflows of $94.1 million, while inflows were only $13 million.

The lack of investor interest is concerning, especially considering that institutional demand was once seen as a key factor in Ethereum's appeal, and this demand also drove Ethereum's gains as investors bet on the U.S. Securities and Exchange Commission (SEC) approving ETFs in May 2024.

Liquidity table for spot Ethereum ETFs. Source: Farside Investors

This trend is also reflected across all other Ethereum products, with a report from CoinShares noting that inflows into Ethereum investment funds aligned with the market's bearish sentiment, with outflows reaching $37.4 million in the week ending April 4.

Low Open Interest and Negative Funding Rates for ETH

Another factor putting downward pressure on Ethereum's price is the lack of enthusiasm in its derivatives market, evidenced by low open interest and negative funding rates.

Open interest (OI)—the total number of outstanding futures and options contracts—remains low, indicating reduced trader participation and speculative activity. Currently, the total open interest stands at $16.7 billion, down 48% from a peak of $32.3 billion on January 24.

The decline in open interest signals a weakening of investor confidence or interest, which could exacerbate price declines as buying pressure gradually dissipates.

Open interest for Ethereum across all exchanges. Source: CoinGlass

Competing Layer 1 Blockchain Networks Outpacing Ethereum

Ethereum's high gas fees have provided an opportunity for competing Layer 1 blockchain rivals focused on high scalability to capture market share. While some activity has migrated to Ethereum's Layer 2 solutions, there are still users and developers opting for other leading Layer 1 alternatives such as BNB Chain, Solana, Avalanche, and Tron.

This has led to Ethereum's network activity growth lagging behind its competitors.

24-hour DApp transaction volume ranking (in USD). Source: DappRadar

Ethereum's unique active wallets (UAW)—addresses interacting with decentralized applications (DApps) on the platform—have decreased by over 33% in the past 30 days, while Solana has seen a decline of 16%, and Tron has grown by 16%.

Similarly, during the same period, the total number of transactions executed on the Ethereum network has dropped by 40.5%, while transactions on BNB Chain, Solana, and Avalanche have decreased by 16%, 30%, and 23%, respectively. Transactions on Tron and Fantom have increased by 23% and 16%, respectively.

Currently, there are no signs that the factors putting downward pressure on Ethereum's price—such as declining network activity and weak demand for its spot ETF products—will reverse in the short term.

While this does not guarantee that Ethereum's price will remain in a long-term downtrend, the technical layout suggests that ETH's price may find support around $1,000.

Related: SafeMoon CEO dismisses lawsuit citing the U.S. Department of Justice's rejection of cryptocurrency department

This article does not contain investment advice or recommendations. Every investment and trading decision carries risks, and readers should conduct their own research before making decisions.

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