The cryptocurrency market experienced a jolt as Ethereum, the second-largest cryptocurrency by market capitalization, saw a significant decline of over 7% after the Federal Reserve announced a hawkish rate outlook for 2025. According to Coinglass data, this downward spiral triggered $102 million in ETH futures liquidations in the past 24 hours, with long and short positions accounting for $90.74 million and $12.16 million, respectively.
The decline in Ethereum came in response to the Federal Reserve’s decision to cut rates by 25-basis-points and a revision in its rate cut projections in 2025 from four to two. This shift in policy led to a drop in Ethereum’s Weighted Sentiment, a metric that gauges an asset’s social volume against its overall market sentiment, to lows last seen in December 2023. This level of sentiment typically suggests a bearish outlook but has historically been followed by a bounce back in prices.
Despite the immediate negative reaction, there is optimism in the Ethereum community. Ethereum long-term holders (LTH) have shown remarkable resilience, steadily increasing their balance to a record high of 110 million ETH in 2024, accounting for over 90% of the entire ETH in circulation, according to IntoTheBlock’s data. This trend towards accumulation could provide a significant boost to Ethereum’s price if it continues.
Ethereum ETFs also continued their upward trend, recording net inflows of $144.7 million on Tuesday. This marks seventeen consecutive days of positive flows, amounting to a cumulative net inflow of $2.46 billion. Notably, BlackRock’s iShares Ethereum Trust (ETHA) crossed 1 million ETH in total net inflows, setting its sights on surpassing Grayscale’s ETHE.
However, Ethereum faces a precarious situation. After being rejected at its yearly high resistance of $4,093 twice in December, Ethereum slipped below its support level near the upper boundary trendline of a symmetrical triangle pattern. If Ethereum fails to bounce back from the $3,550 support level, we could see a decline towards the $2,800 to $3,000 support zone.
Despite this, the Relative Strength Index (RSI) and Awesome Oscillator (AO) indicate bullish momentum is still dominant. But the Stochastic Oscillator is in the overbought region, suggesting a potential price correction. A weekly candlestick close below $2,817 will invalidate the bullish thesis.
Given the volatile nature of the cryptocurrency market, it is recommended for investors to keep an eye on these developments. The resilience of long-term holders and the inflow into Ethereum ETFs offer some optimism, but the potential breach of the $3,550 support level could trigger further declines. This underscores the importance of careful and informed decision-making in this ever-evolving market.
