Ethereum keeps trading more than 50% lower than its price high of $ 4,378, registered on May 12, 2021. Even though the current levels may seem tempting for many potential investors who may want to buy this digital asset, we recommend that you don’t rush to open your long positions on Ethereum just yet. This is because the ETH rate hasn’t reached its local minimum yet and may well sink even lower in the near future.
According to the latest CoinShares weekly digital asset fund flows report, the net outflow exceeded $40 million in the last week of June, with negative dynamics observed for the fourth week in a row. Ether saw record outflows of $50 million last week, which was the largest outflow since 2015. Net outflows over the past three weeks totaled $64 million.
Market participants questioned the bullish prospects for cryptocurrencies after the market crash in May. Before it happened, crypto funds had attracted hundreds of millions of dollars since the beginning of the year.
CoinShares experts said since mid-May, net weekly outflows have hit $313 million. Although the outflow remains moderate relative to 2018 (when net outflows totaled 5%), many believe that the current numbers are not final and that the outflow rate may increase.
The cryptocurrency market remains under pressure amid recent events in China. Let’s recall that the PRC authorities keep banning cryptocurrency trading in the country, saying that any activity related to crypto mining is illegal. Meanwhile, Binance cryptocurrency exchange is under increasing pressure from global regulators seeking to scrutinize its global operations.
This week, the Financial Conduct Authority (FCA) ruled that Binance cannot conduct regulated activities in the UK. Binance is not registered with the FCA and therefore does not have the right to operate an exchange in the UK. The FCA also issued a warning to investors advising people to be wary of any advertisements promising high returns on digital asset investments.
Expectations of an impending monetary policy tightening by the US Federal Reserve to weaken the impact of inflationary pressures on the national economy also negatively affect the cryptocurrency market.
This Friday, data on the US labor market is being released. Strong statistics could significantly increase the chances of an earlier interest rate hike.
Such a decision can weaken the positions of all assets alternative to the dollar, including digital ones. That being said, we recommend waiting for the Ethereum rate to sink below $2000. After that, you can consider long positions on this instrument.