Ether’s price gained on Wednesday but it is struggling to extend the rally. It may be due to a build of short-term selling pressure, as indicated by higher flows of ETH to exchanges.
The second-largest cryptocurrency by market value rose to $270 at around 23:00 UTC on Wednesday, marking a bullish breakout from the multi-week-long trading range of $225 to $250.
As such, some observers are expecting stronger gains. So far, however, the cryptocurrency has remained flatlined below $270.
One possible explanation for the weak follow-through to the bullish breakout could be the pick up in the inflow of ether into centralized exchanges observed after the cryptocurrency’s breakout. Investors or miners usually move coins from their wallets to crypto exchanges when they want to liquidate their investments.
So far Thursday, more than 135,000 ETH have been transferred to centralized cryptocurrency exchanges. That is the highest single-day exchange inflow since June 5, according to Santiment, a blockchain analytics firm.
“The spike in the amount of ETH flowing into centralized exchanges suggests a rising selling pressure. Weak hands might be looking to cash in on the pump. So it’s not surprising that ETH seems to have stabilized around $264 for the moment,” Dino Ibisbegovic, market analyst at Santiment, told CoinDesk in a Telegram chat.
“Weak hands” is the term used to describe traders lacking confidence or resources to hold assets for long-term. Usually, it’s the retail crowd which exits on minor price pumps or dumps. Hence, markets often consolidate or witness temporary price pullbacks following major breakouts like the one seen in ether.
On-chain data show significant outflows from whale addresses. For instance, holdings of the top 100 ETH addresses have declined by 700,000 in the past three days.
In addition, miner balances have declined by 11,000 ETH to 1.163 million ETH since July 11, according to Santiment. However, in both the cases, it is difficult to gauge how much of the outflow went to exchanges.
It remains to be seen if ether faces selling pressure in the next few days due to the rise in the exchange inflows. “In the past, similar spikes have been recorded around local tops, suggesting capitulation,” Ibisbegovic said.
That said, it all depends on how strong the buying pressure is. If the bulls manage to absorb the potential sell wall from weak hands, a pullback won’t be seen and prices could chart a quick rise after a brief consolidation.