Ethereum is increasingly struggling to maintain a convincing bullish narrative as market sentiment continues to deteriorate. Price trends remain fragile, with more analysts openly discussing the possibility that Ethereum is moving into a broader bear market.
Risk appetite across the crypto market continues to decline as confidence wanes after repeated failures to maintain upward momentum. As volatility persists and capital rotates defensively, ETH finds itself at the center of the debate between structural price weakness and behind-the-scenes resilience.
According to a recent CryptoQuant report, Ethereum’s current state reflects a notable shift in supply behavior across exchanges. The exchange supply ratio (ESR), which tracks the percentage of ETH held on centralized trading platforms, has been steadily declining across all major exchanges.
This trend indicates that a smaller proportion of the circulating supply is available for immediate sale, which is an important factor when assessing supply and demand dynamics.
Historically, a decline in foreign exchange balances suggests less selling pressure as investors move assets into self-custody or long-term storage rather than preparing for liquidation. In the current environment, this structural shift adds nuance to the bearish narrative.
Changes in signal structure due to decrease in exchange supply
The report highlights a significant decline in Ethereum’s Exchange Supply Ratio (ESR), supporting the view that supply dynamics are quietly changing behind the scenes. ESR across all platforms dropped to around 0.137, one of the lowest measurements since 2016.
This sustained decline reflects a steady outflow of ETH from exchanges to external wallets, indicating a decreasing propensity for immediate sales and an increasing preference for long-term holding. Historically, similar patterns have emerged during transitional periods following reaccumulation phases or increased volatility, often preceding more stable price action.
This trend is even more pronounced on Binance, where the ESR has dropped to around 0.0325. As the most liquid exchange, Binance’s balance serves as a key barometer of short-term supply conditions. Continued withdrawals of ETH from wallets suggest that the supply available for sale on the spot side is significantly reduced, indicating heightened trader vigilance rather than active distribution.
At the same time, Ethereum is trading around $2,960, an intermediate level that reflects a temporary equilibrium between buyers and sellers. The combination of reduced exchange supply and relatively stable pricing suggests the market is not under significant selling pressure.
Rather, it appears to be entering a phase of liquidity absorption and strategic repositioning, with participants reducing their exposure to short-term trading while preparing for potential changes in market structure.
Ethereum price struggles below major trend levels
The daily chart of ETH highlights a market that remains structurally fragile despite short-term stabilization. Ethereum continues to make new highs after failing to sustain above the $3,200-$3,300 area, confirming the loss of bullish momentum since late October. Prices are currently trading in the $2,850-$2,900 range, with this zone acting as a pocket of short-term demand, but lacking strong follow-through from buyers.
From a trend perspective, ETH remains below short-term and medium-term moving averages. The 50-day moving average has rolled over and is now acting as a dynamic resistance line, while the 100-day moving average is also trending lower.
The 200-day moving average is sitting higher, reinforcing the idea that Ethereum has moved from a trending market to a correction or distribution phase. As long as prices remain below these levels, the rally is likely to be sold rather than extended.
Volume dynamics support this view. The recent rally has occurred on relatively subdued volume compared to the heavy selling seen during previous crashes, suggesting reactive short covering rather than fresh demand.
Structurally, ETH needs to regain and sustain the $3,100 to $3,200 range to reestablish the bullish case. Otherwise, the risk remains tilted towards continued consolidation or deeper corrections towards lower support levels.
Featured image from ChatGPT, chart from TradingView.com
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