Ethereum, trading volume 'halved'...spot buying exploded but prices plummeted

▲ Ethereum (ETH)/AI Generated Image

Ethereum (ETH) is failing to escape its downward trend despite a buying dominance in the spot market. Although aggressive market buying showed a stronger trend than selling, a sharp drop in trading volume and weakening confidence in the derivatives market limited price rebound.

Bitcoinist reported on May 24 (local time), citing an analysis by on-chain analyst Carmelo Alemán, that Ethereum's current price weakness cannot be solely explained by a lack of demand in the spot market. Ethereum resumed its downward trend on May 22, falling by approximately 6.2% and forming a short-term bottom at $2,020.

Alemán explained that the cumulative spot taker volume delta still indicates a buying dominance. This means that over a certain period, more market participants actively executed buy orders than sell orders. However, the ETH price fell from $2,339 on May 11 to $2,065.8 on May 22.

The contraction in spot trading activity was identified as a key factor contributing to price weakness. Since May 11, spot trading volume has decreased from approximately 470,070 ETH to 256,963 ETH, a reduction of over 45%. The trading volume in dollar terms also fell by 52.65%, from about $1.1 billion to $521.4 million.

No clear bullish conviction was observed in the derivatives market either. Alemán stated that open interest only increased by 0.69%, moving from $15.43 billion to $15.54 billion. The cumulative futures volume delta still indicated a dominance of long positions, and funding rates remained positive since May 11. This means that long-position investors are paying fees to short-position investors to maintain their positions.

The net exchange inflow indicator recorded approximately -80,507 ETH. This means that more ETH left exchanges than entered. Typically, ETH leaving exchanges is interpreted as a decrease in potential selling volume, but this time it did not lead to a price increase.

Alemán analyzed that the current trend might be due to a greater supply available for sale than current demand. He explained that potential bullish pressure from the spot and futures markets is being absorbed by the supply, preventing a price rebound.

He said, "It is highly probable that bearish pressure will prevail until ETH recovers spot trading volume, breaks resistance, and confirms a healthy expansion in the derivatives market. In the short term, the price appears to be heading towards the $1,984 support level, and if that support breaks, the next point could be the $1,937 support level."