Ether (ETH) dropped to a low of $3,363 on June 16 after slipping 15% from $4,000. The second-largest cryptocurrency by market capitalization is down 4% over the last seven days.

Data from Cointelegraph Markets Pro and TradingView show Ether’s price hovering around $3,518, about 14% below its multi-year high of $4,091 set on March 12.

Accompanying Ether’s decline is a 43% leap in daily trading volume, currently at $14 billion, reinforcing the high sell-side activity.

Despite this gloomy outlook, ETH appears to have found support from the $3,500 level, and several technical and onchain metrics point to an upside potential for Ether.

Reducing supply on exchanges

One factor supporting Ether’s upside is reducing supply on exchanges. According to onchain data provider CryptoQuant, Ethereum balances on exchanges reached a five-year low of 16.7 million ETH following a 9.3% drop over the past 90 days.

The total balance between inflows and outflows among centralized exchange wallets shows a steep decline between May 20 and June 14, when withdrawals from the trading platforms began to surge. This drop accompanies a 14% rise in Ether’s price over the same period.

Decreasing ETH supply on exchanges simply means investors could be withdrawing their tokens into self-custody wallets, indicating a lack of intention to sell in anticipation of a future price increase.

This is explained by a spike in accumulation by large holders over the last few weeks. Additional data from market intelligence firm Santiment shows that wallets holding between 10,000 and 100,000 ETH have risen since May 25.

In a June 16 post on X, popular trader Ali Martinez shared a Santiment chart saying:

“#Ethereum whales have bought over 700,000 $ETH in the past three weeks, totaling approximately $2.45 billion!”

This means that whales have not sold on the latest rally in ETH to $4,000, fueled by the approval of spot Ethereum exchange-traded funds (ETFs) in the United States. Instead, they have continued to accumulate, suggesting most want to position themselves for more gains.

Spike in Ethereum’s open interest backs ETH upside

Increased demand for leverage resulted in a surge in ETH futures open interest (OI), which increased from $15.06 billion on June 14 to the current value of around $16.15 billion.

Data from Coinglass shows that Ether futures OI broke back above $12 billion on May 21, after dropping below this level on April 14. From there, the OI has jumped nearly 36% in less than 30 days, suggesting increased demand for leveraged ETH positions.

Ethereum’s onchain and derivatives markets reflect investors’ optimism and expectation for a spot Ether ETF launch over the coming weeks.

From a technical point of view, ETH’s latest drop precedes a period of growing bullish divergence between its price and the relative strength index (RSI) in the four-hour time frame.

Ether’s price dropped between June 10 and June 14, forming lower lows. But, in the same period, its daily RSI climbed, forming higher lows.

As a rule of technical analysis, a bullish divergence between falling prices and a rising RSI indicates weakness in the prevailing downtrend, prompting traders to secure discounts at local lows.

Launch of spot Ethereum ETFs to drive ETH price higher

The historic approval of spot Ethereum ETF applications on May 23 by the United States Securities and Exchange Commission (SEC) saw the price rally more than 12% to brush shoulders with $4,000. Before that, the price jumped 33% in less than a week in anticipation of the approval.

Market participants are now eagerly waiting for the spot Ethereum ETFs to begin trading, with analysts setting July 2 as the possible launch date.

According to Bloomberg Senior ETF analyst Eric Balchunas, spot Ether ETF could potentially begin trading in the U.S. by July 2.

Balchunas’ comments signaled a turnaround in confidence from his previous stance when he claimed that Ether ETF applicants were still waiting for feedback from the SEC while debating whether to push back his July 4 prediction.

“Note: our previous over/under was July 4th so this isn't major shift but 1) we started to feel like it would take longer so this is kinda good news and b) we basically decide the over/under on where are most torn 50-50 on where to bet and July 2nd is that date right now.”

On May 23, the SEC approved eight 19b-4 filings to list spot Ether ETFs on various U.S. exchanges. However, they were not allowed to start trading until they had the required S-1 registration statement approvals.

As market participants anticipate the launch of spot Ether ETFs, they also anticipate Ether’s price rising significantly in the days before and after the debut.

This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.