Ethereum's Initial Gains Wiped Out

This sell pressure was due to multiple factors, including a leverage shake-down and spot outflows.

Ethereum’s initial gains for the year were completely wiped out on Saturday, sending the second-largest cryptocurrency down more than 4%. This sell pressure was due to multiple factors, including a leverage shake-down and outflows from crypto ETFs.

Earlier in the week, there was a strong focus on the U.S. crypto ETFs, specifically highlighting the seventh consecutive day of inflows, reaching $128.7 million. This built upon the third consecutive day of inflows, totaling $346.4 million, on January 3rd.

However, this may have given a false sense of optimism, setting the stage for a swift reversal. After pivoting to outflows, the world’s largest cryptocurrency ETFs saw a peak outflow of $235.66 million.

In contrast, Bitcoin ETFs remained in the green in the last 24 hours, despite seven days of outflows from Ethereum ETFs. This may indicate a shift in cryptocurrency dominance.

Outflows from Ethereum ETFs amounted to $86.8 million on Saturday, aligning with the observation of negative spot flows on exchanges during the same period.

Moreover, the sell pressure had a noticeable impact on Ethereum’s dominance ratio, which had rebounded to 12.87% over the weekend, following a period of decline from 13.35% on Friday.

Nevertheless, this recovery was quickly reversed, sending the ratio as low as 12.32%. However, Ethereum might attempt to regain higher dominance from its current level, as the same zone previously demonstrated support.

Another factor that could be hindering a swift recovery for ETH is the significant increase in leveraged long liquidations, which has contributed to the sell pressure observed over the last two days.

The appetite for leverage has been growing in recent months, with long liquidations rising by over 700% since January 3rd. In total, more than $173 million worth of liquidations were observed in the last 24 hours.

This suggests that the early January rally, which saw Bitcoin attempt to break above $17,000 and Ethereum rise toward $1,600, may have been a set-up for a final leverage shake-down.

However, this narrative could be shifting as whales have been selling since the start of the year, but recent data shows them accumulating during the dip.

While outflows were lower at 411,300 ETH on Saturday, January 7th, compared to the previous day, with a total of 341,000 ETH, the amount of ETH being sold by whales was significantly lower at 519,620 ETH.

This observation suggests that whales might be aiding in a mid-week recovery for ETH, which slid to $1,440 on Saturday morning, having recovered slightly from the day’s lows of $1,420.