Ethereum Price Dips Amid Risk Aversion, But Whales Keep Accumulating
Ethereum (ETH) is trading in the red, falling below $3,700. This decline follows a break below a key support level from the previous week. ETH has dropped nearly 7% this week. This drop coincides with new reciprocal tariffs from U.S. President Donald Trump and a hawkish stance from the Federal Reserve (Fed), triggering risk-off sentiment in the market.
Despite this growing risk aversion, whale wallets and institutional investors are steadily accumulating ETH. This signals long-term confidence among holders.
Risk Aversion Prevails Due to Trump’s Tariffs and Hawkish Fed
Ethereum’s price is currently below $3,700, marking a nearly 7% decrease this week. The Fed’s interest rate decision on Wednesday fueled this price drop.
The U.S. Fed held the interest rate steady in the 4.25%-4.50% range for the fifth consecutive time. This occurred despite pressure from President Trump and his allies to lower borrowing costs.
Risk aversion increased after Fed Chair Jerome Powell stated that the central bank had not made decisions about potential rate cuts in September. This highlighted Powell’s hawkish stance. The probability of a September rate cut fell from nearly 60% before the meeting to approximately 43% after the press conference, according to the CME Fedwatch tool.
In addition to the Fed’s stance, trade war headlines have been mixed. The week began with optimism following an agreement between the U.S. and the European Union (EU), similar to an announcement between the U.S. and Japan. The White House also reported ongoing discussions with China.
However, as the August 1st deadline approached, agreements with major trading partners like Canada, Australia, and India remained uncertain. Furthermore, Trump announced a 50% tariff on Brazilian imports and a universal 50% tariff on imports of semi-finished copper products and copper-intensive derivatives, effective August 1st.
The Kobeissi Letter reported that Trump is imposing numerous new reciprocal tariffs, including 39% on Switzerland, 30% on South Africa, and tariffs on many Southeast Asian countries. These tariffs will take effect on Friday at midnight. Meanwhile, S&P 500 futures have fallen slightly, primarily due to weak earnings results from Amazon.
Ethereum Whale Wallets and Institutional Demand Remain Strong
Despite the price correction, whale wallets and institutional demand for Ethereum have strengthened. Data from Lookonchain shows that whale wallets continue to accumulate ETH tokens. Two new wallets added another 68,297 ETH, worth $252 million, on Friday, according to the data. Since July 9th, a total of 12 new wallets have accumulated 790,449 ETH, valued at $2.92 billion.
Institutional demand is also rising. According to data from SoSoValue, spot Ethereum exchange-traded funds (ETFs) in the U.S. recorded an inflow of $306.58 million this week through Thursday, continuing their streak of positive flows since mid-May. In July, monthly flows reached $5.43 billion, the highest level since their launch.
Ethereum in August: What to Expect?
Ethereum reached a new yearly high of $3,941 on July 28th, achieving a 48.80% return for the month. Historically, Ethereum has generally generated a positive return for traders in August, with an average gain of 5.47%. If regulatory clarity improves, ETF demand continues to strengthen, and tariffs and geopolitical uncertainty decrease, traders could see positive returns in August.
Ethereum Price Forecast: ETH Closes Below Key Support Level
Ethereum’s price decreased nearly 3% on Thursday, closing below its daily support level of $3,730. It is trading below $3,700.
If ETH continues its pullback, it could extend the decline to the next support level at $3,500.
The Relative Strength Index (RSI) on the daily chart is falling below its overbought level and pointing downward, indicating a fading bullish momentum. The Moving Average Convergence Divergence (MACD) also showed a bearish crossover on Wednesday, further supporting the bearish thesis and the downward trend on the horizon.
On the other hand, if ETH rebounds, it could extend the advance towards its key psychological level of $4,000.
Ethereum – Frequently Asked Questions
What is Ethereum?
Ethereum is a decentralized, open-source blockchain with smart contract functionality. It serves as the base network for the cryptocurrency Ether (ETH), the second-largest cryptocurrency and the largest altcoin by market capitalization. The Ethereum network is designed for scalability, programmability, security, and decentralization, attributes that make it popular among developers.
How does Ethereum work?
Ethereum uses decentralized blockchain technology, where developers can create and deploy applications independent of central authority. To facilitate this, the network features a programming language that helps users create self-executing smart contracts. A smart contract is essentially code that can be verified and allows transactions between users.
What is staking in Ethereum?
Staking is a process where investors grow their portfolios by locking their assets for a specific period instead of selling them. Most blockchains use it, especially those employing the Proof-of-Stake (PoS) mechanism, where users earn rewards as an incentive for committing their tokens. For most long-term cryptocurrency holders, staking is a strategy to generate passive income from their assets, putting them to work in exchange for rewards.
What is “The Merge”?
Ethereum transitioned from a Proof-of-Work (PoW) mechanism to a Proof-of-Stake (PoS) mechanism in an event dubbed “The Merge.” The transformation occurred because the network wanted to achieve more security, reduce energy consumption by 99.95%, and execute new scaling solutions with a possible threshold of 100,000 transactions per second. With PoS, there are fewer barriers to entry for miners considering the lower energy demand.
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