Leading altcoin Ethereum (ETH) has surged over 40% in the past week, riding a wave of renewed optimism in the cryptocurrency market. At press time, ETH maintains a strong position above the psychologically significant $2,500 level.
However, this upward momentum may be losing steam as U.S. investors appear to be taking profits. How might this impact Ethereum's near-term price performance?
Ethereum's Price Rally Under Threat as U.S. Investors Exit Positions
According to CryptoQuant data, Ethereum's Binance Premium Index (CPI) peaked at 0.022 on May 10 before entering a downward trend. As of this writing, the metric stands at just 0.0063.
Key observations about the CPI trend:
- Despite ETH's price increasing 5% during the same period
- The declining CPI suggests growing sell pressure from U.S. investors
- This pattern could significantly impact ETH's valuation
The CPI measures price differences between Binance (popular with U.S. investors) and other global exchanges. It serves as an effective sentiment gauge:
- Rising CPI: Indicates stronger U.S. buying demand (Binance premium)
- Falling CPI: Signals profit-taking or waning U.S. interest
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On-Chain Metrics Paint a Bearish Picture
Ethereum's Price-Daily Active Address (DAA) Divergence reinforces concerning signals:
- Santiment data shows negative readings despite price increases
- Current divergence stands at -58.2%
- Indicates price growth isn't supported by network activity
This suggests ETH's rally lacks sufficient organic demand, increasing near-term correction risks.
Critical Price Levels to Watch
At publication time:
- Current price: $2,598
- Key resistance: $2,725 (multi-month level)
- Immediate support: $2,424
- Secondary support: $2,243 if breakdown occurs
Potential scenarios:
- Bearish outcome: Continued profit-taking pushes ETH toward $2,424 support
- Breakdown scenario: Potential drop to $2,243 if support fails
- Bullish case: Renewed buying pressure could retest $2,745
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Frequently Asked Questions
Why does the Binance Premium Index matter for ETH?
The CPI reveals institutional and retail sentiment among U.S. investors, who significantly influence ETH's liquidity and price action.
How reliable is the DAA divergence indicator?
While not infallible, sustained negative divergences often precede price corrections when valuations outpace network fundamentals.
What catalysts could reverse ETH's bearish pressure?
Major developments like ETF approvals, protocol upgrades, or institutional adoption could reignite bullish momentum despite current profit-taking.