Ethereum (ETH) has experienced a significant drop, falling below the $3,400 resistance level. This decline has resulted in the cryptocurrency trading around $2,960, marking a nearly 12% decrease over the past week. A surge in selling pressure has impacted both spot and derivatives markets.

Sell-Off Triggered by Resistance at $3,400

Ethereum faced strong rejection near the $3,400 threshold. Analyst Kamran Asghar noted that this rejection was “perfectly off the OTE selling area.” Subsequently, this led to a drop through critical support, refocusing attention on the $2,600 support region.

"$Ethereum Rejected & Ejected. 📉" Perfectly played off the OTE Selling Area at $3,400. We’ve now snapped the ascending support, and the path of least resistance is looking like a trip back to the $2,600 value area.

In the last 24 hours, Ethereum has seen nearly a 5% loss, with trading volumes exceeding $31 billion.

ETF Outflow and Diminishing Exchange Reserves

US spot ETH ETFs witnessed net outflows of $229.95 million on January 20, marking the end of a five-day inflow period, which coincided with the price decline. Increasing outflows suggest potential profit-taking or reduced market confidence.

As reported by CryptoQuant, Ethereum reserves on centralized exchanges have dropped to a record low of 16.2 million ETH since 2016, indicating that the supply available for trading is diminishing. This scenario, coupled with rising staking in Ethereum, could indicate a bullish setup if selling pressure lessens.