Ethereum’s DeFi liquidity is experiencing significant changes. In the last week, the amount of stablecoins in circulation on Ethereum decreased by $3.76 billion from a high of $161 billion. That aligns with ETH experiencing a 9.77% decline over the week, indicating typical risk-off behavior. Concurrently, ETH’s total value locked decreased by almost $10 billion, settling at $85 billion. In summary, there is a significant decline in DeFi liquidity on Ethereum.
Ethereum experiences a liquidity drain as market participants exercise caution. Even with the prevailing risk-off sentiment, there is no indication of a shift towards ETH. The price action of ETH against BTC supports this observation. September turned negative after the pair reached a peak of 0.04 in August. Since then, it has recorded consecutive red weekly candles, establishing two new lower lows, with the most recent at 0.036. In this context, the liquidity squeeze in Ethereum appears to be a result of investors seeking safety, putting ETH’s $4k support at risk of a more significant decline. In straightforward terms, fear, uncertainty, and doubt are dominating over the fear of missing out, resulting in a weak bid side. Approximately $10 billion has exited Ethereum’s locked liquidity, causing the total value locked to revert to levels seen in early August. In summary, the on-chain depth of ETH is decreasing, spot bids are diminishing, and the potential for downside risk is increasing.
Nonetheless, TVL by itself does not serve as a definitive bearish signal. The crucial inquiry revolves around the direction of this liquidity. As per reports, the way these flows develop is expected to influence ETH’s movements in Q4. A significant difference is becoming apparent on the Ethereum network. While TVL continues to slide, signaling thinning liquidity for spot buys and potential short-term pressure, Ethereum’s Total Staked Value is sitting just 0.028% below its all-time high of $36.20 million. Over the past week, approximately 120k ETH have entered staking pools, indicating that long-term holders are reinforcing their positions despite a cautious market atmosphere, securing ETH for yield and accumulating staking rewards.
In summary, the long-term belief in ETH remains robust. Even with a 9.44% dip, investors are still taking profits selectively, and Ethereum’s NUPL remains green. In a risk-off market, this indicates a positive outlook. Traders remain steadfast, holding on for potential gains. Technically, that’s a classic liquidity divergence. The market’s showing risk-off caution in the short term, but long-term conviction remains firmly bullish, with staking flows providing a solid floor under ETH.