Ethereum has encountered significant challenges, slipping nearly 6% in the past 24 hours and almost 13% over two days. This decline extends a turbulent pullback observed in January, as the price briefly fell below crucial support levels, leading to concerns about buyers” ability to regain control in the market.
Despite the overall downward movement, large holders, often referred to as whales, have made their presence felt by accumulating approximately $360 million worth of ETH during the recent dip. This aggressive buying behavior hints at a potential rebound; however, the sentiment among informed traders, also known as smart money, remains cautious.
Technical Analysis: Price Patterns and Momentum Indicators
Currently, Ethereum is trading within a symmetrical triangle formation on the daily chart. Following a rejection near the upper trendline around January 14, the price is now testing the lower boundary. The key question is whether buyers can prevent a breakdown at this critical juncture.
Momentum indicators reveal a noteworthy development. Between November 4 and January 20, while Ethereum made a series of lower lows, the Relative Strength Index (RSI) formed higher lows. This bullish divergence indicates that selling pressure may be diminishing, despite the price testing support levels. Such a signal holds significance, particularly as a bearish divergence in early January preceded the recent drop in price.
Resistance Levels and Supply Clusters
However, any potential bounce is likely to face strong resistance. Data on cost basis indicates a dense supply cluster between approximately $3,146 and $3,164, where around 3.44 million ETH has been accumulated. Many holders are positioned near breakeven, transforming this zone into a formidable resistance area. For any rebound to signify strength and support a reversal, Ethereum must clear this supply cluster.
Whales have shown confidence by increasing their holdings from roughly 103.42 million ETH to about 103.71 million ETH during the recent price decline, representing an accumulation of close to $360 million. This aligns with previous patterns, where similar whale buying activity occurred shortly before a significant price bounce.
Smart Money Signals Caution
Yet, the smart money index remains below its signal line, indicating that informed traders are not yet fully convinced of a reversal. Historically, when this index surged above the signal line, Ethereum experienced substantial rallies, such as a 26% gain in December. Currently, such confirmation is absent, as smart money appears to be waiting for a clear indication that the resistance at $3,160 has been breached.
As the price narrows into a defined range, the first support level to reclaim is $3,050, which Ethereum lost during the recent selloff. A daily close above this level would suggest initial stabilization. Following that, attention will shift to the $3,160 area, where a clean daily close could signify a significant 6% increase from current prices and potentially break heavy resistance, enticing smart money back into the market.
On the downside, a failure to maintain support near the lower triangle boundary around $2,910 would weaken the rebound thesis, exposing $2,610 as the next major support level. While sellers may have gained the upper hand in the short term, the market dynamics indicate that whales are positioning for a possible bounce, while smart money remains vigilant for a confirmation of strength.
In conclusion, Ethereum”s trajectory hinges on its ability to navigate the resistance at $3,160. Should it successfully breach this level, momentum could shift rapidly in favor of buyers, potentially setting the stage for a broader recovery.
