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Why Ethereum [ETH] address outflows may be headed for DeFi

  • ETH sell pressure starts mounting after encountering a resistance wall.
  • ETH 2.0 absorbs some of the ETH liquidity, while leverage traders adjust to the current risk.

March has been quite an interesting month for the crypto market and especially for ETH. But now that the month is coming to an end, it is important to reflect on Ethereum and ETH’s performance which may offer insights into what to expect in April.

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From a price perspective, ETH managed to break through the $1,800 price level multiple times in the last two weeks. However, it has been encountering resistance above the same level.

Similar past instances where ETH encountered a ceiling in its uptrend earlier this year resulted in a significant pullback. By that logic, ETH might be about to experience an increase in sell pressure.

Source: TradingView

ETH’s MFI already indicates that there have been some outflows in the last few days. Some on-chain data also aligns with these observations. According to the latest Glassnode data, the number of ETH sending addresses is currently at a 4-week high. This may indicate a surge in sell pressure.

Outflows only have a pronounced impact if inflows are low. Daily on-chain exchange flow data reveals that ETH outflows were slightly higher at -$7.8 million.

This is a reflection of the exchange flow metrics which reveal a drop in both exchange inflows and outflows. However, the exchange inflows were higher at 112006 ETH compared to 91514 ETH flowing out of exchanges in the last 24 hours.

ETH exchange flows

Source: CryptoQuant

ETH’s supply in ETH 2.0 deposits soars to a new monthly high

While exchange flows confirm that there is some selling pressure in the market, longer-term observations remain in favor of the bulls. For example, the total value of ETH locked in ETH 2.0 deposit contracts is currently at a new all-time high.

This confirms that the market is still experiencing some demand and more importantly, that ETH is flowing into DeFi.

How many are 1,10,100 ETHs worth today?

But what about the situation in the derivatives market? Well, ETH’s open interest fell to the lowest Q1 level in the second week of March.

It has since bounced back, confirming healthy demand in the derivatives segment. However, it dropped slightly in the last two days after the price encountered resistance.

ETH open interest and estimated leverage ratio

Source: CryptoQuant

Meanwhile, the level of leverage in the market recently bounced this week after previously falling to its lowest Q1 levels. A confirmation that ETH’s bounce back from the second week of March was backed by noteworthy leverage.

This may explain why the estimated leverage ratio dropped slightly in the last two days due to the expectations of a retracement.                                                                                                                                  

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