Ethereum's native token, Ether (ETH), staged a recovery above the $3,000 psychological level after a sharp three-day correction that saw its price plummet 13.8%. The decline, which retested the $2,900 support level for the first time in four weeks, was driven by a risk-averse shift in cryptocurrency markets amid geopolitical tensions.
The catalyst for the downturn was U.S. President Donald Trump's threat to impose import tariff hikes on eight European Union countries if they did not cede or sell Greenland to the United States. This geopolitical concern prompted investors to flee to safe-haven assets like gold and silver, putting pressure on crypto markets broadly. Bitcoin and other major cryptocurrencies experienced similar selling pressure during this period.
The market sentiment shift was starkly visible in derivatives data. A total of $480 million in bullish leveraged positions were liquidated over two days. Furthermore, the funding rate on ETH perpetual futures briefly turned negative on Wednesday, indicating that short sellers were paying to keep positions open—a reversal of the typical market structure where longs pay for leverage. This negative funding rate signaled a significant lack of confidence among traders.
Institutional demand also waned. U.S.-listed spot Ethereum ETFs recorded $230 million in net outflows on Friday, January 20th, reversing the previous week's trend of inflows. Data showed investors pulled over $500 million from these ETFs over two days, a level of outflow not seen since mid-December 2023. The combined outflows from Bitcoin and Ether ETFs reached approximately $713 million on Tuesday.
The price recovery was triggered by a de-escalation of the geopolitical tension. President Trump announced he would call off the tariff hikes scheduled for February 1st following what he described as a "very productive meeting" with NATO Secretary General Mark Rutte in Davos. Trump posted on Truth Social about a "framework of a future deal with respect to Greenland," confirming the tariffs were on hold as negotiations continue.
Technical analysis painted a bearish picture prior to the rebound. Ethereum's price action confirmed a bearish pennant pattern on the daily chart, a formation that often precedes further declines. ETH had also fallen below the 50-day Simple Moving Average (SMA) at $3,084, and the Moving Average Convergence Divergence (MACD) indicator confirmed a bearish crossover. Analysts suggested these signals could have led to a further 17% drop toward the $2,500 support level if the macro situation had not eased.
On-chain and network metrics showed contrasting activity. Ethereum network fees declined by 20% from their baseline over the past week. Meanwhile, competitor networks Solana (SOL) and BNB Chain (BNB) saw fee increases of 36% and 27%, respectively. Solana maintained its lead in transaction volume.
