- The Fed sucked $161 billion out of the market, impacting Ethereum.
- Ancient ETH whales are quietly selling off.
Ethereum [ETH] Despite facing recent challenges affecting the entire cryptocurrency industry, the company remains a strong player in the cryptocurrency market.
Analysts are closely watching the Federal Reserve's actions after it pumped $161 billion out of the market.
This was confirmed by an increase in the Treasury general account from $714 billion to $875 billion due to corporate tax payments.
As the Fed continues to liquidate positions in risk-on assets, market liquidity is being impacted.
Source: Thomas/X
The reverse repo program will begin reducing liquidity this week and is expected to continue until September 30th.
These developments are likely to impact the price of Ethereum and its ETFs as market conditions react to changing liquidity levels.
How the Liquidity Stress Impacts ETH Price and Its ETFs
Ethereum price fluctuations are heavily influenced by the Federal Reserve's liquidity measures, especially when it comes to the ETH/USDT pair.
ETH, which is trading at $2,298 at the time of writing, has been on a downward trend since March 2024, with a significant price fluctuation occurring in August.
ETH has broken out of the descending trend channel and is currently hovering around the $2,300 level.
If ETH can sustain above this key price range, it could avoid the negative effects of the Fed’s liquidity cuts and we could see a price reversal.
However, if ETH falls below $2,300 and stays there, a liquidity crunch could send the price sliding.
Source: TradingView
On the bright side, the Chaikin Money Flow (CMF) indicator is showing a value of 0.09, suggesting accumulation and buying pressure.
The relative strength index (RSI) has also risen above its 14-day moving average, indicating possible bullish momentum.
While these technical indicators point to a possible price recovery, the liquidity crisis could see ETH fall further before rising.
Additionally, despite the launch of an Ethereum spot ETF, which has seen funds flow into ETH assets, Ethereum-based ETFs have seen notable outflows.
Source: X
The Fed's liquidity cuts could exacerbate this trend and limit the funds available to invest in risk-on assets such as Ethereum ETFs, which saw net outflows of $25.5 million this week.
The Grayscale Mini ETF (ETH) saw inflows of $2.8 million, but the Grayscale ETF (ETHE) experienced significant outflows, resulting in a loss of $17.9 million, reflecting the change in market sentiment.
This contributed to an overall net inflow of negative $15.1 million, as shown in the latest data released.
Ancient whale trade
Finally, longtime Ethereum whales have been quietly selling large amounts of ETH recently.
The whale sold 2,364 ETH and USDT worth a total of $5.44 million across 27 transactions at an average price of $2,302. Despite this recent sale, the whale still holds 14,272 WETH, valued at approximately $33 million.
Source: SpotOnChain
Whales may be selling due to bearish sentiment caused by the Fed's liquidity cuts, but the selling may slow as market conditions improve.
Ethereum [ETH] Price forecast 2024-2025
Ethereum prices may fall further due to the Fed’s tightening of liquidity, but technical indicators suggest a possible reversal.
However, ETH ETFs and whale activity have signaled caution, and the market may need more liquidity to support price gains.
