Capital Inflows Drop by 50% as Ethereum Price Faces 3rd Red Month in a Row — What to Expect?

The recent data on capital inflows into the crypto markets revealed a 50% decrease. A drop from $52 billion to $26.5 billion within a mere ten days reflected growing caution. Ethereum price much like the rest of the market has been in tricky area.

The direct correlation between capital inflows and the market’s net position change indicated that as inflows diminished. There’s less capital available to sustain or push prices higher.

This could lead to a bearish outlook for Bitcoin and other major cryptocurrencies. If this trend of reduced capital inflows continues, further declines in crypto prices could be seen.

Aggregate Market Realized Value Net Position Change | Source: X

However, this could also set a stage for potential accumulation phases where savvy investors might enter the market at lower prices.

Conversely, a resurgence in inflows could quickly reverse the bearish trend, driving prices up. These capital flow trends closely as they often precede major price moves.

Ethereum Price’s 3rd Red Month in a Row

Following the drop, also Ethereum price has recently endured three consecutive months of negative returns, a trend not observed since 2018, which marks a significant period of volatility for the asset.

Specifically, February saw an 18.78% decline, suggesting heightened bearish sentiment. Historically, similar prolonged downturns have often been followed by either a rebound or further declines, as indicated by the volatile years of 2018 and 2022.

Looking at Ethereum’s historical monthly performance, years that experienced sharp declines were sometimes followed by significant recoveries. For instance, after a tough 2018, 2019 and 2020 saw months with strong positive returns.

ETH Monthly returns (%) | Source: Coinglass

Ethereum’s current trajectory could either mirror this recovery pattern or continue the downward trend, depending on broader market sentiments, regulatory news, and technological developments within the Ethereum network.

Ethereum’s recoveries have often been robust. December 2024’s +47.21% surge following negative streaks showed potential volatility and recovery capability.

As market conditions are ever-evolving, closely monitoring incoming capital, developer activity, and market sentiment will be crucial for predicting future movements.

Given the historical data, Ethereum could be setting up for a recovery phase, but this remains contingent on external market forces and investor confidence.

Weekly Stochastic RSI Signals…

Despite the fall, the Ethereum weekly chart exhibited a significant bullish signal with the Stochastic Relative Strength Index (RSI) indicating a bullish crossover.

Historically, such patterns have often preceded substantial price increases. Notably, similar bullish crosses in September 2023 and September 2024 were followed by strong upward movements, with prices climbing from $1,900 to peaks around $3,700 and $2,900 to $4,000, respectively.

ETH/USD weekly chart | Source: Trading View

Currently, the Stochastic RSI crossover occurs with Ethereum price at $2,682.99. If historical patterns hold, Ethereum price could potentially target the next resistance levels near $3,200 or higher, based on previous responses to similar signals.

Conversely, if the bullish momentum does not sustain, ETH might revisit support levels around $2,200. These past price behavior during similar indicator phases, investors can better navigate the possible volatility and market dynamics ahead.