Ethereum’s Price Puzzle: Investigating Grayscale’s Impact on ETH’s Performance
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Ethereum’s Price Puzzle: Investigating Grayscale’s Impact on ETH’s Performance

  • Ethereum’s price struggles above $2,900, facing a 9.8% weekly decline, with Grayscale’s withdrawal of its Ethereum ETF application casting doubt on approval prospects.
  • Market sentiment sours as Ethereum underperforms the broader altcoin market, while declining open interest ratios signal bearish sentiment among speculative traders, shaping short-term price outlook within a narrow channel.

Ethereum, the second-largest cryptocurrency by market capitalization, finds itself in a precarious position as it struggles to maintain stability above the $2,900 mark, facing a 9.8% decline over the course of the week ending May 10. While the broader altcoin market has shown signs of resilience, Ethereum’s performance has been lackluster, prompting investors to delve into on-chain metrics to decipher the underlying catalysts.

Ethereum Price Underperforming Altcoin Market Average

The global altcoin market embarked on a positive trajectory at the onset of May 2024, witnessing substantial capital inflows exceeding $150 billion within the first week. However, the market rally hit a snag around May 7, with bears erasing a significant portion of the earlier gains. Notably, Ethereum has been underperforming compared to the broader altcoin market, with its decline of 9.8% surpassing the average decline of 6.9% in the same timeframe.

Grayscale’s Withdrawal Adds to Ethereum’s Woes

Amidst Ethereum’s struggle to regain momentum, recent developments surrounding Grayscale, the largest Digital Assets Manager in the US, have further clouded the cryptocurrency’s prospects. Grayscale’s decision to withdraw its Ethereum ETF application has sent ripples across the market, raising concerns about the likelihood of an approval in 2024. This setback comes at a crucial juncture, as regulatory decisions hold significant sway over Ethereum’s trajectory.

Speculative Traders React to Grayscale’s Move

The withdrawal of Grayscale’s Ethereum ETF application has triggered a wave of bearish sentiment among speculative traders, reflected in the declining open interest ratio of Ethereum derivatives contracts since mid-April. Historically, Ethereum’s price has struggled to maintain levels above $3,000 when the open interest ratio falls below 0.2%, a threshold breached on April 14 and reaffirmed on May 10.

Short-Term Outlook and Support Levels

As Ethereum hovers around the $2,900 mark, the outlook remains uncertain, with short-term price movements likely to be constrained within a narrow channel. The declining open interest ratio suggests subdued volatility in the near term, with Ethereum bulls eyeing the $2,850 support level to prevent a breakdown. Conversely, a looming sell-wall at $3,100 poses a formidable barrier to any potential rebound breakout.

Ethereum’s price dynamics continue to be influenced by a confluence of factors, including regulatory developments, market sentiment, and on-chain metrics. While Grayscale’s withdrawal has cast a shadow over Ethereum’s short-term prospects, the cryptocurrency remains resilient, with investors closely monitoring key support and resistance levels to gauge its next move.