Ethereum Recovery Update

Ethereum is recovering slightly after a significant drop that pushed its price below $4,000. The broader market remains cautious as traders reassess their positions following recent volatility, which could lead to a reversal of the bullish trend.

Technical Analysis

By Shayan

The Daily Chart

On the daily timeframe, ETH recently broke below the midline of its ascending channel, the 100-day moving average, and touched the 0.5 Fibonacci retracement level near $3,400-$3,500. This zone coincides with the previous structure support, triggering a bounce towards $3,800.

However, the RSI is still below 40, indicating weak momentum. A daily close back above $4,000 could signify a short-term recovery, but failure to reclaim the channel may result in ETH dropping below the $3,000 range, potentially ending the bull market.

The 4-Hour Chart

The 4-hour chart indicates that Ethereum found temporary support within the $3,400 demand zone after a sharp decline. The RSI also dipped into the oversold territory and is now near 24, suggesting a potential short-term reversal.

Nevertheless, resistance at $3,800 remains critical. A rejection there could lead to another retest of $3,400, while a clean breakout may pave the way toward $4,200 again.

Onchain Analysis

Funding Rates

Funding rates across exchanges have plunged into negative territory, the lowest since late 2024, as traders hurried to unwind long positions. This reset indicates fear and liquidation pressure, but it may also hint at a potential bottom if bearish sentiment continues while the price stabilizes. Historically, negative funding rates during significant pullbacks have preceded short-term recoveries once selling momentum subsides.

Therefore, while the market may be in the early stages of a bearish reversal, there is still hope that this move could merely serve as a purge to cool off the futures market and lay the foundation for a sustainable rally driven by spot trading.