Ethereum (ETH) has experienced a sharp decline, losing 12% over the past week after failing to maintain its position above the $3,400 resistance level. This downturn has pushed the cryptocurrency below a crucial support line, leading to increased selling activity across both spot and derivatives markets. Currently, ETH is trading at approximately $2,960.
The rejection at the $3,400 mark was significant, as noted by analyst Kamran Asghar, who described it as occurring “perfectly off the OTE selling area,” a term indicating a price zone typically targeted by sellers. Following this rejection, the price broke through ascending support levels, bringing the $2,600 region back into focus for traders.
In just the past day, Ethereum”s price has declined nearly 5%, while trading volumes surged to over $31 billion. Additionally, derivatives trading volume rose by 40%, totaling $71.75 billion, according to data from CoinGlass. However, open interest has decreased by about 5% to $39.35 billion, indicating that many traders are closing their positions rather than taking on additional risk.
Order book heatmap data reveals strong buying interest beneath the current price level. Analyst Kriptoholder identified demand in the $2,800 to $2,850 range, with more substantial buy walls forming around $2,500 to $2,600. These levels could potentially attract buyers should the asset drop further, as there are large pending orders from significant players in the market.
On January 20, US spot ETH ETFs reported net outflows of $229.95 million, marking the end of a five-day inflow streak, as per data from SoSoValue. This shift coincided with the recent price decline, suggesting that profit-taking or diminished short-term confidence might be at play.
Additionally, Ethereum reserves held on centralized exchanges have continued to decrease, with CryptoQuant analyst Arab Chain noting a drop to 16.2 million ETH, the lowest level since 2016. Binance specifically saw its reserves decrease from 4.168 million to 4.0 million tokens since the beginning of January. On a more positive note, Ethereum staking has reached new highs, with an increasing number of coins being locked up, which may help support prices once selling pressure subsides.
Looking ahead, some traders are keeping an eye out for a larger market setup. Reports indicate that ETH may be forming an inverse head-and-shoulders pattern, which could suggest a breakout target near $4,400. However, this potential scenario hinges on clearing the necessary resistance levels. A recent analysis from Bitcoinsensus raised the possibility of a $10,000 ETH within the current market cycle, estimating a range of $10,000 to $15,000 based on historical trends and reduced returns. Nonetheless, current market conditions appear to be trending downward, adding a layer of uncertainty.
