Ethereum is currently experiencing a downward trend, trading below the $3,100 mark as the overall sentiment in the cryptocurrency market remains subdued. Following a breakdown from a recent distribution range, ETH has been on a consistent decline, characterized by a series of lower highs and lower lows.
Despite some short-term oversold indicators suggesting potential recovery, buyer interest remains tepid. The open interest in Ethereum derivatives has diminished, indicating a cooling market with limited fresh leverage entering, which could further impact price dynamics.
Technical Analysis of Ethereum
On the daily chart, Ethereum is hovering just above the crucial support level of $3,000, having fallen from the significant $3,500 supply zone. The price is notably below both the 100-day and 200-day moving averages, reinforcing the prevailing bearish sentiment.
Currently, the Relative Strength Index (RSI) is at 32, approaching oversold territory. Should buyers fail to maintain this support, a significant drop to approximately $2,600 could occur, followed by a potential fall to $2,100, which represents a major low. Conversely, reclaiming the $3,500 level would indicate a shift in market strength, necessitating strong volume to validate such a move.
Short-Term Patterns and Market Behavior
Examining the 4-hour chart reveals that ETH is contained within a falling wedge pattern, typically a precursor to a trend reversal. Nonetheless, a confirmed breakout is yet to be seen. The asset is currently testing the lower boundary of this wedge while striving to stay above the $3,000 zone.
Interestingly, the RSI indicates a slight bullish divergence, which could lead to a short-term bounce. However, without a decisive breakout above $3,200 accompanied by substantial volume, any upward movement risks being a false signal.
Market Sentiment and On-Chain Analysis
Recent data shows that open interest in Ethereum has plummeted significantly since early November, dropping from over $30 billion to around $18 billion. This trend aligns with the recent price decline, suggesting that traders are either closing positions, reducing risk, or facing liquidations. Such a drop in open interest often precedes a spike in volatility, which could result in either a recovery or further decline.
Until there is a consistent rise in open interest alongside positive price action, the momentum for Ethereum is likely to remain muted, keeping the market under bearish control.
