Ethereum Staking Demand Plummets 50% Amid Price Struggles

The recent trends surrounding Ethereum have raised eyebrows, particularly in relation to its price stability. Over the last day, the cryptocurrency’s price has remained relatively unchanged, showing a decline of over 5% throughout the past week. Despite a slight rise of approximately 4.5% since February 19, uncertainties about its ongoing recovery loom large.

The analysis indicates a bullish divergence in the days preceding February 19, suggesting that the selling pressure might be diminishing. However, the concurrent decline in staking demand raises critical questions: Is increased liquidity exerting downward pressure on this potential rebound?

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The bullish divergence observed between February 15 and 19 represents a situation where the price of Ethereum hits a lower low, while the Relative Strength Index (RSI) indicates a higher low, hinting at a potential shift in market momentum. A rising RSI during price drops usually signifies that sellers might be losing their grip, leading to possible recovery. Following its dip to around $1,740 on February 6, Ethereum managed to rally near $1,970 recently.

While these indicators suggest a recovery may be underway, exclusive data compiled by analysts has highlighted a significant downturn in staking demand. For Ethereum, staking involves locking away ETH to secure the network and earn rewards, effectively reducing the available liquid supply.

However, a sharp decline in staking activity can reintroduce supply into the market, elevating the risks of selling. According to recent data, cumulative net staking deposits for Ethereum halved, shrinking from 1,994,282 ETH on January 13 to just 1,008,012 ETH by February 22—a staggering decrease of nearly 986,000 ETH.

This reduction indicates that significantly less ETH is entering staking, allowing for increased liquidity in the market. This situation creates a paradox: while the bullish chart signals suggest a potential recovery, dwindling staking demand signals a return of liquidity that could limit upward momentum.

The next question arises: where is the reintroduced ETH going? Examination of exchange balances offers initial insights. Balances of Ethereum on exchanges have recently surged from 14,241,203 ETH to 14,586,720 ETH, marking an increase of about 345,500 ETH, or around 2.4%. This surge indicates a growing availability of ETH for trading, a trend that mirrors levels last observed on February 4, when Ethereum experienced a severe price drop.

The timing of these trends closely links to declines in staking activity, reinforcing the idea that reduced staking demand is contributing to an increase in liquid supply. Additionally, movements among ETH whales, who can significantly impact market prices, have exacerbated these shifts. Since February 19, whale holdings decreased from 113.65 million ETH to 113.42 million ETH, indicating that approximately 230,000 ETH was sold amidst Ethereum’s recovery attempt.

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This selling trend implies that significant holders might be capitalizing on the current liquidity instead of supporting the recovery. The combination of rising exchange balances and whale selling suggests the liquidity entering the market could be generating resistance rather than supporting price increases.

On-chain data regarding cost basis can pinpoint where this resistance may emerge. Cost basis indicates the price levels where investors acquired their ETH, and when prices approach these levels, many are inclined to sell to recover their investments, posing a resistance challenge. Current data shows over 2% of Ethereum’s supply is concentrated in the $2,020 to $2,070 range, aligning closely with significant resistance points on the price chart.

Thus, Ethereum faces a critical testing phase. A successful recovery will require prices to breach the $2,050 mark and subsequently challenge the $2,140 threshold, potentially reaching $2,300 if the upward momentum persists. However, significant selling pressure might arise as ETH approaches these levels due to cost basis concentrations. Coupled with falling staking demand and ongoing whale selling, it may prove difficult for Ethereum to absorb the increased supply without a surge in new demand.

On the downside, a crucial support level has formed around $1,890, approximately 4% below its current price. If this level fails to hold, Ethereum may regress toward its February low near $1,740. Currently, Ethereum finds itself in a precarious position; despite the bullish divergence hinting at recovery, various factors—diminished staking demand, rising exchange balances, whale selling, and strong cost-basis resistance—indicate that returning liquidity may play a decisive role in determining the short-term trajectory of Ethereum.