Ethereum Price Analysis: Assessing the Next Move Following the Decline
Following a significant 37% drop, Ethereum (ETH) has caught the attention of investors as it encounters buying activity near the $2.1K support level. This has led to a bullish rebound, but questions remain about whether this momentum can be sustained amidst current market conditions.
Technical Analysis
The Daily Chart
When examining the daily chart, we can see that Ethereum experienced a strong bullish reaction at the crucial $2.1K support level, causing a swift price increase. This suggests that many investors are confident in Ethereum's long-term value, buying in at lower prices. However, as ETH approaches the $2.8K resistance level, challenges arise. This area, which includes the lower boundary of the previous wedge pattern, represents a significant hurdle.
If ETH faces difficulty breaking through this resistance, it may signify a pullback to previous levels, with the $2K support zone emerging as a critical point to watch. This means that the price could drop back if sellers overpower buyers in this zone.
The 4-Hour Chart
Looking at a shorter timeframe, the 4-hour chart shows ETH's efforts to recover near the $2K support level, with minor upward movements. Currently, ETH is navigating a resistance range defined by the 0.5 and 0.618 Fibonacci levels. These levels often indicate potential areas where price reversals may occur due to increased selling pressure.
If ETH is rejected at this resistance, it may continue its downtrend toward the $2K support. However, should a surprising surge occur, breaking through this resistance might allow ETH to target the $2.8K mark again, providing a critical test for its upward momentum.
Onchain Analysis
Ethereum's recent downturn has led to speculation about the continuation of its bearish trend. Despite this, data from the futures market offers a glimmer of hope. A key indicator is the level of long liquidations, which refers to the closing of long (buy) positions under adverse market conditions.
In bullish markets, a large number of long liquidations can precede a price rally as the futures market stabilizes and increased spot buying occurs. The recent bout of liquidations in Ethereum, reminiscent of events in November 2022, suggests that the market might be resetting. Many leveraged positions have been cleared, potentially paving the way for a bullish rebound.
In summary, while Ethereum faces significant resistance, both technical indicators and futures market dynamics suggest potential for a rebound, though caution is advised until clear trends emerge.
