Ethereum’s price has entered a period of significant weakness, dropping over 15% in the past week amid broader bearish sentiment across the cryptocurrency market. Once celebrated for its transition to a deflationary model following the Merge, Ethereum is now facing renewed inflationary pressure as network supply begins to rise—marking a notable shift in its economic dynamics.
This resurgence in supply, combined with weakening demand, has placed ETH under intense selling pressure, pushing it below critical technical support levels. Understanding the underlying causes of this downturn requires a closer look at both macroeconomic trends and on-chain fundamentals shaping investor sentiment in 2025.
Ethereum’s Shifting Supply Dynamics
Since April 2024, Ethereum’s total supply has been on an upward trajectory—a stark reversal from the deflationary environment observed after the network’s shift to proof-of-stake. Over the last nine months, the circulating supply has increased by 0.37%, reaching approximately 120.4 million ETH.
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This inflationary trend stems from increased staking rewards and reduced token burns, primarily due to lower network activity and transaction fees. When fewer transactions occur, less ETH is burned through base fee mechanisms, tipping the balance from deflation back into inflation.
The implications are clear: when supply grows without a corresponding increase in demand, downward price pressure becomes inevitable. With institutional inflows slowing and retail participation cooling, Ethereum lacks the buying momentum needed to absorb this expanding supply.
Technical Outlook: Breaking Below Critical Support
On the 4-hour chart via TradingView, Ethereum has broken below the $3,087 support level, signaling a resumption of its bearish trend. This level had previously served as a strong floor during consolidation phases, making its breach particularly concerning for technical traders.
Currently, price action shows ETH trading below both the 50-period and 200-period moving averages—classic indicators of a weakening trend. The Relative Strength Index (RSI) sits at just 22 on the 4-hour timeframe, placing it deep in oversold territory. While this suggests a potential short-term bounce may be imminent, it does not confirm a reversal of the broader downtrend.
On the daily chart, RSI hovers near 32—approaching oversold conditions but not yet extreme. Notably, price remains slightly above the daily 50-day moving average, offering a fragile line of defense against deeper losses. However, without strong volume-backed buying, this support could easily give way.
Looking at the weekly chart, Ethereum has been in a clear downtrend since peaking at $4,010 on December 2, 2024. Each successive high has been lower than the last, forming a textbook descending pattern that reflects persistent selling pressure over multiple cycles.
On-Chain Signals: A Glimmer of Hope?
Despite the bearish technical structure, some on-chain metrics hint at possible stabilization ahead. Data from CryptoQuant reveals a recent uptick in funding rates as Ethereum approaches the psychologically important $3,000 support zone.
Funding rates—used to gauge trader sentiment in perpetual futures markets—had been steadily declining, reflecting growing bearishness among leveraged traders. However, the latest rebound suggests that some market participants are beginning to open long positions, anticipating a corrective rally.
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If this recovery in funding rates gains momentum, it could signal the start of a new bullish phase—especially if accompanied by rising exchange outflows or increased staking activity. Conversely, if sentiment falters and funding rates turn negative again, further downside toward $2,800 or even $2,600 cannot be ruled out.
Another key indicator to watch is exchange netflow. A sustained outflow of ETH from centralized exchanges typically indicates accumulation behavior, suggesting investors are moving assets into private wallets for long-term holding. In contrast, inflows often precede sell-offs.
Currently, exchange balances remain relatively stable, but any significant shift could provide early warning signs of an impending breakout—or breakdown.
Core Keywords Driving Market Sentiment
Understanding Ethereum’s current price action involves tracking several core keywords that reflect investor concerns and market mechanics:
- Ethereum price drop
- ETH supply increase
- Deflation to inflation shift
- On-chain analysis
- Funding rate trends
- Support and resistance levels
- RSI oversold signal
- Market sentiment reversal
These terms not only capture the essence of today’s discussion but also align with common search queries from traders seeking actionable insights during volatile periods.
Frequently Asked Questions (FAQ)
Q: Why is Ethereum no longer deflationary?
A: After the Merge, Ethereum became deflationary due to high transaction volumes leading to more ETH being burned than issued as rewards. However, with lower network usage in 2025, burn rates have decreased while staking emissions continue, resulting in net supply growth.
Q: What does rising ETH supply mean for price?
A: An increasing supply without proportional demand creates downward pressure on price. Historically, inflationary phases in Ethereum have coincided with bear markets or extended consolidation periods.
Q: Can Ethereum recover if it stays above $3,000?
A: Yes. The $3,000 level is a major psychological and technical support. Holding above it could attract buyers and trigger a relief rally, especially if funding rates and on-chain activity improve.
Q: What is the significance of funding rates turning positive?
A: Rising funding rates suggest traders are taking bullish positions in derivatives markets. While not a guarantee of recovery, it often precedes short-term price increases as leverage builds on the long side.
Q: Is the current RSI level a buy signal?
A: An RSI below 30 indicates oversold conditions, which may lead to a bounce. However, in strong downtrends, assets can remain oversold for extended periods. Confirmation via volume and candlestick patterns is essential before considering entry points.
Q: What are the next key resistance levels if ETH rebounds?
A: Immediate resistance lies at $3,250—the previous swing high—followed by $3,400 and $3,650. A decisive break above $3,650 would signal renewed bullish momentum.
Final Thoughts: At a Market Crossroads
Ethereum stands at a pivotal juncture. Its transition from deflationary to inflationary supply dynamics has introduced new challenges just as macroeconomic uncertainty weighs on risk assets. Technical indicators point to oversold conditions, yet structural weaknesses remain.
For investors and traders alike, the path forward hinges on whether demand can re-emerge to counterbalance rising supply. Monitoring key levels like $3,000, along with on-chain metrics such as funding rates and exchange flows, will be crucial in assessing the likelihood of recovery.
While short-term pain is evident, Ethereum’s long-term fundamentals—including its role in DeFi, NFTs, and layer-2 ecosystems—remain intact. Markets often test resolve before rewarding patience; now may be one such moment.