Ethereum exchange reserves hit record lows – Good news for ETH?

• Ethereum has failed to hold levels above $2,800, with the recent uptrend showing signs of weakening.
• Despite the exchange-supply ratio at record lows, ETH price continues to struggle.

Ethereum [ETH] jumped to a multi-week high above $2,800 on the 24th of August as the broader cryptocurrency market rallied. ETH has since lost some of these gains, dropping slightly by 0.6% in the last 24 hours to trade at $2,742 at the time of writing. 

Data from Whale Alert showed that some large ETH holders might be looking to cash in profits after one whale recently moved $34 million worth of ETH to Coinbase. 

With the recent uptrend showing signs of weakening, where is ETH headed next? 

Bearish signals emerge

Ethereum trading volumes had dropped by 18% at press time per CoinMarketCap data. The declining volumes coincide with the slight drop in price as fewer buyers support the uptrend. 

The Relative Strength Index (RSI) at 42 shows sellers have entered the market. The RSI line has also been forming lower lows on the hourly chart, further showing a weakening uptrend. 

With the RSI line crossing below the signal line, it confirms a prevailing bearish momentum.

Source: Tradingview

The Directional Movement Indicators (DMI) also show bears are in control. The +DI (blue) is below the -DI (orange), indicating a bearish trend. However, with the Average Directional Index (red) at 14, it shows that the bearish trend is weak. 

If the bearish momentum persists, ETH will likely drop lower to test the 0% Fibonacci level ($2,718). Failing to hold this price could pave the way for further drops. 

Exchange reserves continue to drop 

According to CryptoQuant, Ethereum exchange reserves have dropped to record lows after spiking on 5th August as prices crashed. 

Low exchange reserves suggest that few investors are holding ETH on exchanges, reducing the short-term selling pressure and the likelihood of ETH registering drastic price drops. 

The Ethereum exchange supply ratio has also dropped sharply this month showing that traders are less inclined to sell at current prices.

Source: CryptoQuant

Increased investor interest in ETH can further be seen in the rising open interest.

Read Ethereum (ETH) Price Prediction 2024-25

After falling below $10 billion in early August, Ethereum’s open interest has since increased to more than $11.5 billion at the time of writing per Coinglass data. 

However, with the long/short ratio at 0.92, more traders have opened short positions on ETH anticipating a price drop. 

Source: Coinglass