Ethereum's recent attempt to break through the critical $4,000 resistance level was met with strong rejection, raising concerns about seller dominance in the market. This failure has intensified fear, and if key support levels are not maintained, a sell-off could occur in the coming days.
Technical Analysis
Daily Chart Overview
Ethereum recently experienced a surge, targeting the key $4,000 resistance. However, significant selling pressure in the fair value gap between $3,700 and $3,800 led to a strong rejection.
This pushed ETH closer to its previous swing low of around $3,300. A daily close below this level could signal further bearish momentum. From a broader perspective, the $3,000 support zone remains a critical defense area for buyers, as it aligns with the 100-day moving average. If Ethereum's price breaks below this region, a substantial decline could occur in the medium term.
4-Hour Chart Insights
On the lower time frame, Ethereum's price action formed a triple top pattern near the $4,000 zone, accompanied by a bearish divergence in the RSI indicator. This bearish reversal pattern highlights a loss of buying momentum.
Subsequently, the asset broke below the crucial $3,500 support level, triggering a retracement and subsequent chain reaction. Currently, Ethereum is approaching the key support region around its major swing low of $3,000, which aligns with the 0.5 to 0.618 Fibonacci retracement levels.
Failure to hold this support could lead to further declines, with potentially lower price targets in the medium term.
On-Chain Analysis
The sustainability of any market price surge often depends on rising funding rates, reflecting strong demand in the derivatives market. Without this growth, the uptrend may falter. It is worth noting that this increase does not need to happen immediately, but its absence during a rally raises concerns about market strength.
During Ethereum's recent rally, funding rates spiked sharply midway through the uptrend, indicating delayed demand inflow. However, after ETH faced rejection at the $4,000 resistance, funding rates declined significantly.
This decline highlights reduced commitment among derivatives market traders and insufficient demand to sustain the upward trend. If Ethereum fails to hold above the $3,000 support level, the market could face increased selling pressure and a deeper correction. Therefore, the $3,000 support level remains crucial for ETH's next move.
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Frequently Asked Questions
What caused Ethereum's recent price rejection?
Ethereum faced strong selling pressure between $3,700 and $3,800, leading to a rejection at the $4,000 resistance level. This was compounded by a bearish divergence in the RSI and a triple top pattern on the 4-hour chart.
Why is the $3,000 support level important?
The $3,000 zone aligns with the 100-day moving average and key Fibonacci retracement levels. It serves as a major defense area for buyers; if broken, it could trigger a significant medium-term decline.
How do funding rates affect Ethereum's price?
Funding rates reflect demand in the derivatives market. A decline in these rates suggests reduced trader commitment and lack of sustaining demand, often leading to increased selling pressure.
What is the significance of the RSI bearish divergence?
A bearish divergence occurs when the price forms higher highs while the RSI forms lower highs. This indicates weakening momentum and often precedes a trend reversal or pullback.
Could Ethereum recover if it holds $3,000?
If Ethereum holds the $3,000 support, it could consolidate and potentially rebound, as this level represents a strong buyer interest zone and aligns with long-term moving averages.
What are the medium-term targets if $3,000 breaks?
A break below $3,000 could lead to further declines, with targets potentially extending toward lower support levels, though specific targets would depend on market conditions and volume trends.