Key Points
- Negative market sentiment around Ethereum (ETH) has been observed, possibly leading to a price drop.
- Ethereum has been underperforming compared to Solana (SOL) and Bitcoin (BTC).
Investor optimism towards Ethereum has recently decreased, as indicated by a negative shift in market sentiment. This change has been observed in Kaito data, showing Ethereum’s market sentiment turning negative beyond the levels seen in August.
Market Sentiment and Underperformance
The downturn in August occurred during a broad market sell-off. However, the recent negative sentiment is associated with the ongoing uncertainties regarding Ethereum’s underperformance against Bitcoin and Solana.
Ethereum’s decline continued as Bitcoin and Solana experienced growth during this mid-recovery period. This trend has been noticeable since early 2024. The SOL/ETH ratio, which tracks Solana’s relative value against Ethereum, reached a new all-time high of 0.070 this week, indicating Solana’s outperformance.
Ethereum Price Action
Andrew Kang, co-founder of crypto VC Mechanism Capital, believes that this trend may persist and trigger an Ethereum sell-off. He stated that having a long position in Solana hedged with Bitcoin or Ethereum has been one of the most risk-adjusted positions that could have been established this year.
A recent decrease in Ethereum’s price was observed, along with a lack of interest from whales, as shown by the negative Whales vs. Retail Delta. This indicates that whales were not going long on Ethereum relative to retail, and a drop in whale exposure often precedes price declines.
However, if whale interest improves, Ethereum’s price may see some relief. A surge in whale positions in mid-October led to an Ethereum price rally above $2.7K. Unless whale demand improves, Ethereum’s pullback could continue in the short term.
At the time of writing, Ethereum’s price had slipped below $2500, a 10% drop from its recent high of $2.76K. If the decline continues, the trendline support and demand zone above $2.3K could be key levels to watch in the short term.
The decrease in demand among US spot Ethereum ETFs could also pose a challenge for the altcoin’s price. The products started the week with outflows of $20.8 million on Monday. Between Tuesday and Thursday, the products managed to net over $15 million in inflows, translating to a total weekly outflow of about $5 million, not including Friday’s data. In short, the demand was net negative as of press time and could delay a strong price reversal.
