Ethereum price has intensified its sell-off today, reaching its lowest level since August 19 this year. It has now slumped by over 31.5% from its highest point in August this year, and technicals suggest that it has more downside to go. For one, Culper Research, the research shop that warned about Jensen Huang affair also warned about Ethereum.
Culper Research warned about Ethereum
Jensen Huang made headlines this week after confirming that he had an affair with a Chinese national whom US intelligence officials believe to be a spy. The report led to his resignation on Thursday.
While the report has shocked Wall Street, it was nothing new to Culper Research, a New York firm that warned about the affair with Alice Huang in May.
Investors have now turned their attention to Culper’s other warnings, including one it issued against Ethereum in March. At the time, the firm said it was short Ethereum, the second-biggest cryptocurrency in the world. It also disclosed a short position on BitMine, the biggest Ethereum holder in the world.
In its report on Ethereum, Culper Research said that Ethereum was in a “death spiral” after last year’s Fusaka upgrade. One of the aspects is that base fees collected on Ethereum will continue falling, meaning that less ETH is burned under EIP-1559. As a result, that means that Ethereum’s deflationary story will keep weakening.
This view has been confirmed by the recent data by DeFi Llama. The numbers show that Ethereum has generated just $27.3 million in fees this quarter, down from $34 million in the previous quarter. In total, the chain has made $153 million this year, down from $523 million last year.
Further, while Ethereum wallet growth has intensified, Culper Research found that most of this was because of spam. Indeed, the analyst found that 22% of all Ethereum transactions were tied to address poisoning.
The analyst also warned that Vitalik Buterin had continuing selling his ETH coins, a sign that he expects the coin to remain under pressure.
Ethereum ETF outflows have soared
Fundamentals also explain why ETH price has continued falling. Data shows that spot Ethereum ETF outflows have surged in the past few weeks. They have lost over $766 million this month after losing $1.6 billion last month. In total, they have lost over $2.6 billion in this period, a sign that demand has continued to wane.
More data shows that Ethereum’s futures open interest has continued to fall. The daily figure dropped by 6.5% in the last 24 hours to $23.5 billion. At its peak this year, Ethereum had an open interest of over $60 billion. A falling open interest is a sign that investors expect the coin to continue dropping.
Ethereum liquidations have jumped in the past few months as exchanges closed leveraged positions, leading to more pressure.
ETH price technical analysis
Ethereum price chart | Source: TradingView
Technicals suggest that ETH price has more downside to go. It is about to form a death cross pattern as the spread between the 50-day and 200-day moving averages narrowed. This death cross pattern normally points to more downside.
The coin has dropped below the 61.8% Fibonacci Retracement level, confirming more downside. Therefore, the path of the least resistance for the token is bearish, with the next target to watch being at $1,500. On the flip side, a move above the 50% retracement level of $2,157 will invalidate the bearish outlook.
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