Ethereum has recently experienced a significant downturn, prompting concerns among investors. However, a closer look at the daily chart reveals an interesting trend. The price has found support within a crucial zone, consisting of the 100-day moving average at $3050 and the price range between the 0.5 ($3190) and 0.618 ($2972) Fibonacci levels. This zone is essential as it attracts demand and could prevent further downward pressure from market sellers. Additionally, there is a minor bullish divergence between the price and the RSI indicator, hinting at a potential bullish resurgence targeting the $3.5K threshold. Despite these positive indicators, a breach below this critical support zone could lead to a cascade effect towards the 200-day moving average at $2.5K.
A deeper analysis of the 4-hour chart reveals a descending wedge pattern forming during a multi-month consolidation correction. The price has reached the lower boundary of the wedge and is hovering around the $3K support region. The current price action suggests a period of consolidation characterized by minimal volatility, indicating a battle between buyers and sellers. However, a divergence between the price and the RSI indicator on the 4-hour timeframe points towards the strength of buyers, increasing the chances of a bullish upswing in the medium term. If the bullish trend continues, the next target for the price would be the critical resistance level at $3.5K. On the contrary, a break below the support zone could result in a descent towards the $2.7K support level.
As Ethereum’s price shows signs of recovery, it is essential to assess the driving force behind this resurgence. A crucial factor to consider is the funding rates, which reflect the sentiment in the market. Positive funding rates indicate bullish sentiment, while negative rates signify fear among investors. In recent times, as Ethereum’s price has been on a downtrend, the funding rate metric has followed suit, declining steadily until reaching near-zero levels. This alignment implies that the recent drop in price has led to the liquidation of numerous positions in the perpetual market, resulting in a subdued futures market. Consequently, the market seems poised for an influx of long positions, potentially leading to a fresh upward surge in Ethereum’s price.
Ethereum’s price seems to be on the verge of a bullish rebound, supported by critical technical and market analysis. While there are still risks associated with a breach below key support levels, the overall outlook appears positive for Ethereum in the medium term. Investors and traders should closely monitor price movements and market indicators to capitalize on potential opportunities in the coming days.