Over the weekend Ethereum (ETH) plunged in price by nearly 30%. This chaos occurred amidst surging geopolitical tensions, particularly after the US entered the Israel-Iran proximity conflict on the side of Israel. After a brief pullback, the cryptocurrency garnered enough interest to find its footing around a crucial support line, indicating that buyers are returning.

ETH’s price movements were largely affected by international events as well as domestic market forces, particularly investor behavior and ETF flows. The digital asset is currently walking a tightrope between risk-on and risk-off, following equities and a plethora of macro factors.

ETH Bounces Off Key Support

ETH came down to $2,110 which was wonderful support. This price point coincides with the lower edge of a symmetrical triangle formation and the 100-day SMA. Protecting this level was essential. ETH/USD Long-term Over the weekend, ETH lost over 10%, breaking through a smaller symmetrical triangle and the 50-day Exponential Moving Average (EMA) on Friday.

A Reuters report of a US strike against three Iranian nuclear facilities preemptively extended the first drop. As a result, this crisis pushed ETH towards the $2,100 threshold. The cryptocurrency immediately bounced back from $2,300. This increase came in the wake of news reporting that Iran had already fired missiles on a US military installation in Qatar.

ETH is sensitive to global developments, particularly on the geopolitical front. These regulatory events can quickly reshape investor sentiment and ignite turbulent swings in trading activity. The fact that we were able to bounce back and hold above this $2,110 support shows underlying strength and potential for a rebound.

Investor Activity and Market Dynamics

According to data Ethereum investors have specifically taken some massive profit and some massive loss since the bear market started on Friday. More importantly, investors netted $750 million in combined realized profits and losses.

When ETH fell, investors on average realized about $500 million in profits realized. Conversely, they were hit by more than $250 million in losses from their selling activity. It was short-term holders who created the selling pressure. The precipitous decline in the 90 and 180-day Mean Coin Age metrics is a direct reflection of this trend.

Despite the selling activity, there are signs that investors on the spot market are buying the dip at a modest pace. Furthermore, exchanges experienced three consecutive days of net outflows, reaching nearly 110,000 ETH on Monday, suggesting a potential shift in sentiment as investors move their holdings off exchanges.

ETF Inflows and Potential Upside

Aside from this recent price volatility, US spot Ethereum ETFs feasted on $124 million in net inflows. This is the ninth week in a row of positive inflows, according to CoinShares on Monday. This steady accumulation of capital into ETH-based investable products is a manifestation of strong institutional appetite toward the cryptocurrency.

Looking further out, ETH stands a chance to mount a comeback. If it does manage to break above the upper limit of a descending channel, it could bullishly retest resistance around $2,500. A positive breakout above this level would open the doors for ETH to extend its rally toward the $2,850 resistance barrier.

Analysts caution that the market remains at an inflection point, with digital assets caught between risk-on momentum and risk-off defensiveness amid ongoing geopolitical uncertainty.

The market remains at an inflection point, with digital assets straddling the line between risk-on momentum and risk-off defensiveness amid ongoing geopolitical uncertainty. - QCP analysts

Worries about that possible instability and additional volatility is evident in the options market.

The surge in short-dated IV [...] confirms the market is bracing for more instability. Volatility markets are telling us this isn't over. - QCP analysts

ETH's drawdown [has] been accompanied by a 15-point jump in 7-day implied volatility (IV) to 83%, reflecting increased downside hedging and uncertainty. - Sean Dawson, Head of Research at Derive