Ethereum at Max Pain: Institutions Accumulate After the 65% Drop

Ethereum traded above $1,900 on Friday, showing signs of recovery after a 65% price drop in recent months. Institutional investors have continued to pull funds from Ethereum ETFs, with nearly $81 million in outflows reported on Thursday alone. This marks the second consecutive day of withdrawals, reducing cumulative inflows to $11.83 billion.

Bitcoin also saw a modest rebound, trading above $65,000 despite a broader risk-off environment. The crypto market experienced a $2.6 billion liquidation wave, with long positions suffering $2.13 billion in losses. Short positions lost $469 million in the same period.

Ethereum's price has been constrained by resistance at $2,000, limiting its upside potential. The technical indicators suggest that while there are early signs of recovery, the bearish momentum remains intact. The Relative Strength Index (RSI) has improved, but the MACD remains below its signal line, signaling ongoing bearish pressure.

Why Did Ethereum See Continued Outflows?

Ethereum ETFs have recorded outflows as institutional investors shift capital to more stable assets. According to SoSoValue, nearly $81 million was withdrawn on Thursday. This follows a pattern of reduced confidence in Ethereum's ability to sustain an uptrend. The ETF net assets under management have dropped to $10.9 billion from a high of $11.83 billion.

The broader derivatives market has also reflected this bearish sentiment. Ethereum's open interest has declined, indicating a reduction in speculative positions. This trend suggests traders are scaling back exposure rather than adding to it.

How Did the Broader Crypto Market React?

Bitcoin's Open Interest (OI) has dropped to approximately $47 billion, signaling aggressive retail liquidation. The OI averaged $48.5 billion on Thursday, showing an overextended correction. If sentiment does not improve, further buying pressure may be absent, limiting the possibility of a strong recovery.

XRP also saw a decline in futures open interest to $2.4 billion, the lowest in a year. This drop suggests reduced investor confidence in XRP's ability to maintain an uptrend. XRP ETFs saw modest inflows of $1.28 million on Thursday, a decline from $4.8 million the previous day.

What Are Analysts Watching Next?

The Bitcoin Fear & Greed Index fell to a score of 9 out of 100 on Friday, its lowest since the Terra collapse in mid-2022. This indicates extreme bearish sentiment in the crypto market. With Bitcoin down nearly 35% in 2026, traders are closely watching whether this correction will continue or if a stable base will form.

Voluntary deleveraging is becoming more common as leveraged positions reduce exposure to avoid liquidation. For example, a wallet attributed to President Trump's World Liberty Financial sold 173 WBTC to repay $11.75 million in debt on Aave V3. This move helped maintain a health factor above the liquidation threshold.

Bitcoin's price decline has also had a material impact on companies like Strategy, which reported a net loss of $12.6 billion in Q4 2025. The company's Bitcoin holdings are now sitting on an unrealized loss of over $9.5 billion. Strategy holds 713,502 BTC, acquired at an average cost of $76,052 per coin.

Ethereum's position on Base has also changed. The Layer 2 solution has seen a net outflow of $4.3 billion this year, reversing its previous inflow trend of $3.8 billion in 2024. Ethereum, meanwhile, has seen a net inflow of $8.5 billion in 2026, regaining its leadership in the blockchain space.

The Ethereum derivatives market has also seen a significant shift in capital. The total ether deposited on Base has dropped from 1.82 million ETH to just over 835,000 ETH in four weeks. This decline is attributed to Binance withdrawing capital to Layer 1.

The market is now at a critical juncture. Traders are watching for signs of a sustainable recovery, but the risk of further volatility remains high. With open interest and liquidation data pointing to a bearish trend, the path forward for both Bitcoin and Ethereum remains uncertain.