Ether’s (ETH) most recent sell-off saw it lose the crucial $1,500 support level, and a number of technical indicators suggest that ETH may witness a deeper correction before embarking on a sustained recovery.

Data shows Ether’s price dropped below its realized price — an onchain metric that recalculates the market value of a cryptocurrency based on the price at which each coin last moved on the blockchain.

According to CryptoQuant contributor, theKriptolik, ETH price trading below this metric, which is historically a bearish sign. When the realized price is above the spot price, it usually acts as resistance and places “most holders suddenly in a loss position,” the analyst said.

The analyst added:

“Drops below the realized price often mark the capitulation phase, where investors lose confidence and begin selling en masse.”

In June 2022, Ether’s realized price fell below the spot price, preceding a 51% drop in ETH price following the Terra Luna market crash. A similar scenario was witnessed in November 2022, when the metric fell below the price before Ether dropped 35% following the FTX collapse. 

Now that a similar scenario is playing out, the current setup loosely echoes those prior bearish continuation phases, with ETH price at risk of a deeper correction. 

Spot Ethereum ETF flows remain weak

Spot Ethereum ETFs continue to weaken, with more than $3.3 million in net outflows on April 8. In fact, these investment products have recorded $94.1 million in outflows over the last two weeks against $13 million in inflows.

The lack of investor interest is concerning, especially since institutional demand was considered a key part of Ether’s appeal and played a role in the gains accrued in May 2024 as investors bet on an ETF approval from the US Securities and Exchange Commission.

This is also reflected across all other Ether products, with the report from CoinShares pointing out that flows into Ethereum investment funds align with the bearishness seen across the market, with $37.4 million outflows recorded during the week ending April 4.

ETH open interest is low, and funding rates are negative

Another factor weighing Ether’s price down is the lack of enthusiasm in its derivatives market, evidenced by low open interest and negative funding rates. 

Open interest (OI)—the total number of outstanding futures and options contracts—remains low, indicating reduced trader participation and speculative activity. Currently, at $16.7 billion, the metric is 48% below its peak of $32.3 billion witnessed on Jan. 24.

Declining OI signals waning investor confidence or interest, which can exacerbate the price decline as buying pressure dries up.

Compounding this issue are negative funding rates in Ether’s perpetual futures markets, which are hovering below 0%, indicating that bearish sentiment dominates the market.

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When rates turn negative, it means shorts (bets against the price) are paying longs to keep their positions open, suggesting a dominance of bearish sentiment. 

Competing layer-1 blockchains outpace Ethereum network activity

Ethereum’s high gas fees offer an opportunity for competing layer-1 blockchains focusing on high scalability to eat into its market share in the space. While a fraction of the activity has moved to Ethereum layer-2 solutions, some users and developers opt for other top layer-1 alternatives such as the BNB Chain, Solana, Avalanche and Tron.

As a result, Ethereum’s network activity growth has fallen behind that of its rivals. 

Ethereum’s unique active wallets (UAW) — addresses engaging with decentralized applications (DApps) on the platform — declined by over 33% over the last 30 days compared to just a 16% decrease on Solana and a 16% increase on Tron.

Similarly, the total number of transactions deployed on the Ethereum network dropped by 40.5% during the same period, while transactions on the BNB Chain, Solana and Avalanche decreased by 16%, 30% and 23%, respectively. Transactions on Tron and Fantom increased by 23% and 16%.

There’s no indication that the factors weighing on Ether’s price — such as declining network activity and low demand for its spot ETF products — will reverse anytime soon. 

While this doesn’t guarantee that Ether’s price will remain in an extended downtrend, the technical setup suggests that ETH’s price may bottom at $1,000.

This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.