Ethereum (ETH) has shown lackluster performance in recent weeks, with a slight price increase, but it has struggled to maintain levels around or above £3,000 after a brief spike in August.
According to recent analysis by CryptoQuant analysts, the behind-the-scenes situation of the ETH price struggle is quite interesting, with significant changes in the asset's net flow.
This change in Ethereum's net flow could have significant implications for ETH, potentially affecting market reactions positively or negatively.
Analyzing Ethereum Netflow
CryptoQuant analyst Amr Taha revealed in a recent post on the CryptoQuant QuickTake platform that Ethereum has recently experienced a surge in net flow, with approximately 96,000 ETH flowing into derivative exchanges.
Bitcoin exchange net flow. | Source: CryptoQuant
Taha stated that this influx may indicate traders are preparing for potential price movements, as historically, large transfers to derivatives platforms often precede periods of increased volatility or even corrections.
Taha's analysis is based on peaks in May and early July, indicating that Ethereum's current activity may signify increased market volatility. The analyst wrote:
The recent surge in net flow may signal the arrival of another peak in market activity, potentially leading to price adjustments or significant volatility based on trader positions.
Market sentiment driven by Bitcoin
In addition to Ethereum's net flow, Taha also delved into the Bitcoin futures sentiment index, noting that the sentiment peaks shown by this indicator can serve as indicators of broader market behavior.
Bitcoin futures sentiment index. | Source: CryptoQuant
He pointed out three instances of sentiment index spikes, marked by red circles (as shown above), each coinciding with local market tops. This trend suggests that Bitcoin's price typically declines after trader sentiment peaks.
Therefore, the sentiment index can act as a 'contrarian indicator'—when optimism reaches its peak, prices often adjust accordingly. These sentiment patterns may indicate that investors should prepare for potential volatility in Ethereum, as it is highly correlated with Bitcoin.
Meanwhile, Ethereum continues to hover below £3,000. So far, the asset has experienced a pullback of 3.1% over the past week. However, the performance over the past day is attempting to be more positive.
During this period, Ethereum rose slightly by 0.9%, climbing to £2,559 earlier today, and as of the time of writing, it is trading at £2,541.
ETH price shows an upward trend on the 2-hour chart. Source: ETH/USDT on TradingView.com
Despite significant volatility in the asset over the past week, rising above £2,700 and falling below £2,500, Ethereum's daily trading volume appears to remain calm.
According to Coingecko data, this indicator has remained between £1.5 billion and £1.9 billion over the past week, without any significant spikes or drops.
