Ethereum's exchange reserves have fallen to 3.8 million ETH, while transaction fees and smart contract deployment rose over the past week — signals that point to reduced downside risk. But spot ETF outflows of $70.7 million on Friday broke a five-trading-day streak of inflows, and XWIN Japan cautions that falling reserves alone do not confirm a bottom.
Three on-chain readings point to easing downside risk for Ethereum, which has been cheap since February as it traded below its overall cost basis at $2.3k. More holders were at a loss, and the recent rally to $1,920 and subsequent reset lower meant sellers still have the upper hand.
Exchange reserves drop to 3.8 million ETH
XWIN Japan observed that exchange reserves fell from 5 million ETH in mid-2025 to 3.8 million at the time of writing, which signals both accumulation from holders and easing selling pressure. The market price also sits below the realized price, setting up favorable conditions for long-term investors to buy the leading altcoin on the cheap.
However, XWIN Japan noted that falling exchange reserves, by themselves, do not confirm a final market bottom. AMBCrypto reported that the realized price bands meant a price drop to $1.15k is possible if the 2022 bear market cycle plays out once more.
Fees and contract deployment turn higher
Crypto analyst Crypto Onchain wrote that Ethereum has been quiet over the past quarter, with median transaction fees 92% below the 90-day average. Yet over the past week, those fees rose by 16%.
New smart contract deployment surged 190% compared to the 90-day baseline, and median tip fees rose 86%. As a result, the increased contract deployment and tips pointed to genuine short-term on-chain demand and activity.
Leverage stays subdued as ETF flows reverse
Leverage remained subdued, and funding rates were cooling on Binance. Open Interest has dropped from $15.06 billion at the start of June to $11.85 billion at press time.
The flow picture cuts the other way, though. Spot ETF outflows of $70.7 million on Friday, the 24th of July, broke a five-trading-day streak of inflows that began on the 16th of July. AMBCrypto warned that stalled momentum could be a warning of a bearish trend continuation.
If the short-term uptick in activity is sustained while leverage stays under control, a price uptick driven by organic demand could be viable.
Source: AMBCrypto
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