Ethereum’s native token Ether has lost more than half its value in dollars in 2022, while also losing value to Bitcoin (BTC). It is currently below $2,000 due to several reasons.
Moreover, the ETH price could suffer even greater losses in June because of another set of factors which will be discussed later.
Ethereum funds lose capital in masse
According to CoinShares’ weekly market reports, investors have pulled $250 million from Ethereum-based investment funds by 2022.
This is in stark contrast to other currencies. In 2022, for example, $369 million was invested by investors in Bitcoin-based investment funds.
Solana, a layer-one protocol for blockchain, and Cardano have both attracted $9 million and $104 million respectively.
By assets, flow into/from crypto funds Source: CoinShares/Bloomberg
The recent Ethereum fund withdrawals are a sign that the recent crash of TerraUSD (UST), and Terra (LUNA — tokens in Terra’s algorithmic stabilitycoin ecosystem — has slowed interest in the entire decentralized finance (DeFi).
ETH’s bullish prospects are still glued to expectations of a boom on the DeFi market because Ethereum’s blockchain hosts a majority of financial apps in the sector. The total value locked (TVL), for Ethereum-based apps, was $68.71million as of June 5, which is almost 65% of total DeFi TVL.
Ethereum TVL as of June 5 Source: DeFi Llama
The TVL still shows a significant retreat from Ethereum’s DeFi pool, which was hovering at around $100 billion before the collapses of Luna Classic (LUNC), and TerraUSD Classic(USTC) on May 9.
According to Ilan Solot (a Tagus Capital partner), Ether is likely to continue its decline due to macro risks posed by the Federal Reserve’s hawkish policy and a cautious outlook about the DeFi sector.
According to the Financial Times, he said:
“If the Federal Reserve tightens, the world will be in recession. People need to pay $4.5/gallon for gas. They’ll have less money to invest in DeFi and spend on Blockchain games.
Technicals are slow
The bearish outlook for Ethereum is also evident in the trading behavior since May.
Ether fluctuated within a range that is defined by a horizontal and falling trendline support, respectively. This pattern is more like a “descending triangular” pattern, which can be a bearish continuation pattern if it’s formed in a downtrend.
Related: The total crypto market cap could fall below $1 trillion if the above 3 metrics are not improved
Technical analysis dictates that descending triangles are resolved when the price breaks below its support trendline. Then, the price falls to the maximum height of the triangle. As shown in the chart below, Ether could experience a similar downtrend in June.
Daily price chart for ETH/USD featuring the ‘descending triangle” setup. Source: TradingView
If ETH’s prices fall below the lower trendline of the triangle, it could drop to $1,350 in June. This would be a 25% decrease from today’s price.
Exchanges have increasing ETH reserves
According to CryptoQuant data, the global Ether balances have increased by 550 459 ETH over May according to CryptoQuant.
This amounts to nearly $950 million in inflows into the hot wallets of the exchanges since the Terra scandal began.
Reserves of Ethereum. Source: CryptoQuant
Trader send tokens to exchanges when trading them for other assets. If the trend in ETH reserves starts to reverse, then selling pressure will likely rise.
com. You should do your research before making any investment or trading decision.