Ethereum recently attempted to break above the middle threshold of its multi-month descending channel at $2.6K, but this attempt resulted in a false breakout, causing a significant rejection and sharp decline. This pattern indicates a possible continuation of the downtrend toward the $2.1K support level in the mid-term.
**Technical Analysis by Shayan**
**The Daily Chart**
Ethereum’s price action on the daily chart has revealed a bull trap. Much like in late August, when ETH rose above the descending channel’s middle line only to be quickly rejected, a similar pattern has emerged. After briefly surpassing the $2.6K resistance, the price couldn’t maintain its momentum and faced substantial selling pressure, resulting in a 15% drop. This failure to set a higher high indicates the sellers’ dominance in the market. The cryptocurrency is now approaching a critical support zone around $2.1K, in line with a previous major swing low. It is likely to enter a descending consolidation phase, gradually declining toward this key level.
**The 4-Hour Chart**
On the 4-hour chart, Ethereum’s failure to maintain upward momentum near the 0.5 ($2.6K) – 0.618 ($2.8K) Fibonacci levels triggered a bearish three-drive pattern. This well-known reversal pattern, along with a bearish divergence between the price and the RSI indicator, suggested that sellers were regaining control over the market. Consequently, Ethereum experienced a sharp decline, falling back toward the ascending flag’s lower boundary of $2.3K. Currently, sellers are aiming to push Ethereum’s price below the flag’s lower boundary, potentially initiating a new bearish trend. If this downward breakout occurs, ETH’s next major target would be the $2K psychological support, though the $2.1K level remains the first line of defense for buyers.
**Onchain Analysis by Shayan**
This analysis centers on Ethereum’s 50-day moving average of funding rates, providing insight into broader sentiment in the futures market. Recently, ETH’s 50-day moving average funding rate has been steadily declining, hitting its lowest point in 2024. This persistent downtrend underscores bearish sentiment among futures traders, indicating an overall lack of buying interest. Such conditions are often linked to declining prices as short-sellers dominate the market. For Ethereum to recover and climb to higher price levels, demand from the perpetual futures market must increase. The continued drop in funding rates suggests that selling pressure is more aggressive than buying interest, reflecting bearish expectations for ETH in the mid-term. Although negative funding rates generally indicate bearish conditions, they can sometimes signal a potential market reversal through short liquidation cascades. For this to happen, substantial buying pressure from the spot market must support a rebound.
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