Two Reasons Why Ethereum's Bull Run Will Pause in August 2023

In the past two weeks, the broad crypto market has shown low activity, keeping Ethereum within a narrow trading range.

Since July 21, 2024, this altcoin has repeatedly tested the resistance level near $3,859 while finding support at $3,524, struggling to break out of this zone. With diminishing momentum, on-chain indicators currently suggest that ETH may face a prolonged consolidation phase or a potential price breakout.

Large Ethereum Investors Step Back

According to data from CryptoQuant, the estimated leverage ratio (ELR) of ETH has decreased across all cryptocurrency exchanges, reflecting a decline in investor confidence and reduced risk appetite among its futures contract traders. According to the data provider, ETH's ELR is currently at a weekly low of 0.76.

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The ELR index measures the average leverage that traders use to execute trades on an asset on cryptocurrency exchanges. It is calculated by dividing the open interest of the asset by the exchange's reserve for that currency.

ETH's declining ELR signals a market environment where traders avoid high-leverage bets. Its investors are becoming cautious about the short-term prospects of the coin and are not taking high-leverage positions that could amplify potential losses.

If this decline in speculative activity continues, it will reduce the likelihood of a short-term breakout and increase the chances of ETH remaining within the range.

Moreover, ETH whales have also reduced accumulation in the past week, possibly to take profits. According to data from IntoTheBlock, the net flow of large coin investors has decreased by 224% in the past seven days, indicating a retreat from ETH's primary investors.

Large investors are whale addresses controlling more than 0.1% of a asset's circulating supply. Their net flow tracks the difference between the number of coins they buy and sell in a specific time period.

When the net flow of large investors of an asset increases, whales are buying more of its coins/tokens on exchanges, potentially predicting a price surge.

Conversely, as with ETH, when it decreases, it signals reduced activity and profit-taking among these primary investors.

The Showdown Between ETH Buyers and Sellers: Will the $3,524 Level Hold or Break?

The above indicators suggest a decline in confidence in ETH's short-term price appreciation and the reluctance of its primary investors to commit significant capital to the market right now. If this continues, downward price pressure on the coin will increase, potentially triggering a break of support at $3,524.

If this occurs, the coin could extend its decline to $3,067. However, if the bulls regain the advantage, they could push a breakout above the resistance at $3,859. If successful, ETH price could climb above $4,000.