TLDR
Ethereum price dropped to a two-week low of $4,150, shedding 4.5% from recent highs
A record-high exit queue of 910,461 ETH ($3.91 billion) is waiting to be unstaked
Investors are de-risking ahead of the Federal Reserve’s Jackson Hole meeting on Friday
ETH ETFs experienced consecutive outflows after two weeks of strong inflows
Network activity has declined with a 28% drop in active addresses since July 30
Ethereum’s price has fallen to a two-week low as the cryptocurrency faces multiple challenges that could impact its short-term performance. The second-largest cryptocurrency by market cap has dropped to $4,150, representing a 4.5% decline from its Tuesday high of $4,350.
This price movement mirrors Bitcoin’s recent correction to $112,000 and comes at a time when the broader crypto market is showing signs of uncertainty.
A major concern for Ethereum investors is the looming supply unlock. The current exit queue on Ethereum’s Proof-of-Stake network has reached 910,461 ETH, worth approximately $3.91 billion.
This indicates that many stakers are looking to unstake their tokens, with data from the Validator Queue showing a 15-day waiting period for this supply to take effect.
Xu Han, Liquid Fund partner at HashKey Capital, explained to Decrypt that this record-high exit queue is “primarily driven by profit-taking, as many participants are looking to lock in gains with Ethereum trading near its 2021 all-time high of around $4,900.”
While profit-taking is a key motivation, Han also pointed to another factor contributing to the unstaking trend. “The recent spike in Ethereum borrowing rates on Aave has made the previously popular leveraged staking trade less viable.”
Leveraged staking involves borrowing Ethereum to stake via a Liquid staking token. The increase in borrowing rates has forced “traders to unwind positions and repay loans by unstaking,” according to Han.
Market Sentiment Weakens
The demand for new Ethereum staking stands at 258,951 ETH (roughly $1.09 billion), which is well below the exit demand of $3.91 billion. Once unstaked, this supply will likely enter the open market, potentially adding selling pressure.
Ethereum ETFs have also experienced two consecutive days of outflows late last week and on Monday. This follows two weeks of strong inflows and suggests waning investor interest.
Investors appear to be reducing risk ahead of the Federal Reserve’s Jackson Hole meeting scheduled for Friday. Jake Ostrovskis, an OTC trader at Wintermute, noted that investors have “de-risked before Friday’s Jackson Hole” following concerning economic data releases last week.
The meeting is expected to provide clarity on the anticipated September rate cut decision, with Federal Reserve Chairman Jerome Powell likely to signal the direction of monetary policy. Analysts are anticipating “a hawkish speech, which is leading to de-risking with a ‘known unknown’ in the calendar,” Ostrovskis added.
Network Activity Declines
Adding to Ethereum‘s challenges is a decline in network activity. Active addresses interacting with the blockchain have fallen to approximately 600,000 from a July 30 high of 841,000, representing a 28% decline.
Network Growth, which tracks new addresses joining Ethereum, has also dropped by 28% to 138,000 over the same period. This suggests a lack of new adoption and reduced on-chain activity.
Arthur Azizov, Founder and Investor at B2 Ventures, expects Ethereum to potentially consolidate between “$3,900-$4,400” as investors await clarity on “Fed policy’s changes and tech stocks’ performance.”
On the technical side, Ethereum has formed a bearish trend line with resistance at $4,350. The price is currently trading below $4,250 and the 100-hourly Simple Moving Average, with initial support near $4,065.
If Ethereum fails to clear the $4,320 resistance, it could continue to move downward toward the $4,020 support zone. A break below this level might push the price toward $4,000 or even $3,850.
Despite these short-term challenges, HashKey’s Han believes that the market’s capacity to absorb the supply shock is “strong,” driven by “robust inflows from institutional ETFs and digital asset treasuries.”
Many experts who previously spoke to Decrypt acknowledged the current uncertainty but remain bullish in the long run, expecting Ethereum to reach $6,000 to $8,000 by the end of the year.
The exit queue “prevents a mass validator exodus,” Ethereum developer Preston Van Loon tweeted Saturday, explaining that “without it, validators could rush to exit during a detected or anticipated attack on Ethereum’s consensus, weakening the network’s economic security when it’s most needed.”
