Ethereum (ETH) started the new week on a bearish note, with its price dropping by 8% on January 13. The altcoin showed signs of weakness during early Asian trading hours, forming a deviation after sweeping liquidity from the previous day's highs.
During this correction, Ethereum also lost its weekly support level of $3,200, pushing prices to their lowest point since November 21, 2024.
Ethereum Futures Traders Turn Bearish
ETH's fall below $3,200 triggered another major liquidation event for altcoins within two weeks.
- Over $90 million in leveraged positions were wiped out.
- $77 million in long positions were liquidated.
- Open interest hit a record high of $32 billion on January 7, indicating a bearish dominance in futures markets with heavy short positions over the past week.
By January 12, ETH's open interest dropped to $28 billion, suggesting traders were closing previous long positions early or taking profits from the recent $3,700 high.
Ethereum Has Turned "Inflationary" Over the Past 10 Months
While ETH futures markets have recently turned bearish, the underlying demand for holding Ethereum has declined over the past year.
- Supply Increase: Circulating ETH grows by 45,000 ETH monthly.
- Current Supply: Only 32,000 ETH less than pre-Merge levels.
Ethereum was expected to become deflationary after transitioning from Proof-of-Work (PoW) to Proof-of-Stake (PoS) due to ETH burns. However, since early 2024, ETH supply growth has outpaced burn rates.
As analyst Benjamin Cowen noted:
"Demand has been so low that #ETH supply has remained inflationary for roughly the past 10 months."
Technically, net inflation hasn’t occurred yet since supply remains below pre-Merge reserves. However, prolonged low demand could eventually push supply back above its cap.
Technical Outlook: Key Levels to Watch
- A wick below $3,000 likely marks a new range low.
- The $3,000–$3,100 liquidity zone has been cleared, triggering a buy-side liquidity sweep.
- Immediate bullish divergence at $3,000 suggests buyer dominance—but further weakness could push ETH toward $2,800 support (including the weekly Fair Value Gap active since Donald Trump’s election win).
FAQ
Q: Will Ethereum recover soon?
A: While short-term bullish divergence exists, sustained recovery depends on broader market sentiment and demand resurgence.
Q: Is ETH still a good long-term hold?
A: Yes, but investors should monitor supply dynamics and network adoption trends closely.
Q: What’s the next critical support level?
A: $2,800, followed by the weekly FVG zone, is the next major defense area.
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