Ethereum (ETH) is currently at a critical juncture as market dynamics shift, presenting an opportunity for bulls to reclaim momentum in the coming days. After failing to breach the $4,800 mark amidst new all-time highs for Bitcoin (BTC), Ethereum experienced a noticeable correction, dropping around 3% to settle below the $4,500 threshold on Tuesday.
This recent sell-off coincided with a bearish divergence observed on the four-hour trading chart, a signal that suggests a weakening of buying pressure and often precedes a short-term reversal in price direction. As ETH retests the $4,500 level, emerging data from both on-chain and derivative markets reveal mixed signals about future movements.
On one hand, the cumulative volume delta (CVD) for spot transactions has seen a pronounced decline, indicating increasing selling pressure among spot traders. Contrarily, open interest in futures contracts remains robust, reflecting that leveraged traders continue to engage heavily in the market, potentially positioning themselves for upcoming volatility.
Traders who are currently on the sidelines are closely monitoring these developments, particularly the potential for a liquidity sweep around the $4,400 mark. This zone is notable for housing a cluster of stop-loss orders, making it a point of interest for traders aiming to capture liquidity-driven trades. A rebound from this level could rejuvenate bullish sentiment and reignite the drive toward new price peaks, effectively invalidating the prevailing bearish indicators.
However, should Ethereum be unable to maintain its footing at this critical support level, further downward pressure could drive prices toward the $4,250 to $4,100 range. This area features a confluence of both four-hour and one-day order blocks, which are essential zones frequently targeted by large buy orders, acting as possible turning points in price action.
According to recent insights from XWIN Research, the overarching liquidity environment may be contributing to Ethereum’s current performance. The U.S. M2 money supply—a key indicator of liquidity—has surged to an unprecedented $22.2 trillion. In contrast to Bitcoin’s impressive climb of over 130% since 2022, Ethereum’s growth sits at approximately 15%, suggesting a potential “liquidity lag.”
Nevertheless, several onchain indicators hint that Ethereum could be on the verge of a turnaround. Exchange reserves for ETH have fallen to around 16.1 million, reflecting a 25% decrease since 2022. This trend underscores a gradual decline in sell-side pressure, as more ETH is moving into self-custody and staking, thereby restricting the available supply in public markets.
Crypto analyst Skew observed that the recent market rally represents the “fourth tap” against the $4,700 to $4,800 resistance zone. Should ETH manage to sustain its position within this range, it would signal potentially positive conditions for future upward movements. Conversely, a deeper correction could merely set the stage for a higher low, preparing the ground for a renewed ascent.
As the market continues to evolve, all eyes will be on how Ethereum reacts to these key support levels and liquidity trends in the days to come. Investors are advised to conduct thorough research as they navigate the unpredictable waters of the cryptocurrency market.
