Key points:
Ethereum struggled to surpass $4,800, resulting in a 3% drop due to a bearish divergence.
Spot selling pressure increased, yet leveraged traders remain engaged.
A bounce back from $4,400 could reignite bullish momentum towards new highs.
On Monday, while Bitcoin (BTC) reached a new peak, Ether (ETH) couldn’t breach its resistance at $4,800, leading to a 3% decline below $4,500 on Tuesday. This price drop followed a bearish divergence on the four-hour chart, typically signaling weakened buyer strength and often precedes a local peak or short-term reversal.
ETH revisited the $4,500 level, with onchain and derivatives data presenting mixed signals. While spot cumulative volume delta (CVD) significantly dropped, indicating net selling in the spot market, futures open interest and CVD remained high. This indicates leveraged traders are still active and positioned for market fluctuations, even as spot traders are taking profits.
These scenarios often attract those on the sidelines, looking for liquidity-driven entry points rather than impulsive actions. A possible liquidity sweep around $4,400, where stop orders typically cluster, could trigger a short-term reset. A robust rebound from this area could negate the bearish sentiment and indicate renewed bullish trends this week.
However, if ETH fails to protect this zone, the correction might extend towards $4,250 to $4,100, where both four-hour and one-day order blocks align. These overlapping regions usually represent significant demand points where major buy orders previously existed, making them critical levels for potential trend reversals.
Related: XRP experiences highest ‘retail FUD’ since Trump tariffs: Is a significant sell-off looming?
“Liquidity lag” for Ether may be decreasing
XWIN Research reports that the US M2 money supply, which measures economic liquidity, has reached an all-time high of $22.2 trillion. While Bitcoin has surged over 130% since 2022 due to this liquidity influx, Ether has only increased by 15%, indicating a “liquidity lag.”
Despite this, various onchain metrics indicate that Ether might be catching up. Exchange reserves have declined to approximately 16.1 million ETH, down over 25% since 2022, suggesting a persistent decrease in sell-side pressure. Net exchange flows are negative, reflecting that ETH is shifting into self-custody and staking, thus lowering the supply available for trading.
Crypto trader Skew observed that the recent rally marked the “fourth tap” of the $4,700-$4,800 range. If ETH can maintain this level, “that would be quite bullish.” If not, a deeper correction may establish a higher low, potentially paving the way for the next upward movement.
Related: Altcoin values rise as USDT dominance declines: Is ‘altseason’ upon us?
This article does not constitute investment advice or recommendations. All investment and trading actions involve risks, and readers should perform their own research before making any decisions.
