Key takeaways:
Ether fell below $4,300 after failing to maintain momentum above $4,700, with $338 million in liquidations intensifying the selling pressure.
Analysts point to $4,300 as a critical support level, but September’s historical weaknesses raise the likelihood of a 10% downturn.
A drop in open interest and negative funding rates indicate long positions are being liquidated, potentially setting the stage for a rebound if spot demand returns.
Ether (ETH) was unable to hold above the $4,700 resistance this week, falling back below the $4,300 mark on Friday, breaching a vital ascending trendline support highlighted by Fundstrat’s Tom Lee.
This drop occurred amid dwindling market liquidity and follows a broader $338 million liquidation of Ether futures positions from August 22 to 23, increasing the chance of a more profound correction as September approaches.
Lee and Fundstrat analyst Mark Newton identified the $4,300 level as a crucial floor on Tuesday, referencing neutral relative strength index (RSI) readings and a still-bullish Ichimoku cloud structure as grounds for cautious optimism.
Nevertheless, the outlook appears grim as September’s historical performance looms over the bullish setup. Data from CoinGlass shows that September has historically been Ether’s weakest month, with the altcoin experiencing the worst median returns of -12.55% during this time. This historical trend towards drawdowns indicates that near-term risks remain tilted to the downside if Ether fails to hold the $4,300 support level.
Related: ETH possibly bullish ‘for years’ as megaphone pattern to $10K emerges: Analyst
Divergence in Ether open interest trends
Futures positioning has also become more cautious. Analyst Amr Taha noted that the daily percentage change in ETH open interest (OI) exhibited a higher low compared to its last trough, although the absolute open interest decreased to a lower low on Binance. This divergence indicates a structural imbalance, as retail traders are closing long positions instead of adding new ones.
Total ETH OI contracted to approximately $9 billion. Interestingly, the last occasion open interest fell to this level, ETH rebounded sharply to $4,900, suggesting that a similar clearing of excess leverage could pave the way for recovery.
Meanwhile, funding rates across major exchanges have turned negative, indicating short dominance in perpetual markets. The combination of declining open interest and negative funding rates confirms that long positions are being liquidated rather than initiated.
Historically, such conditions can precede sharp reversals, as negative funding often indicates overcrowded short positioning that may trigger a faster-than-anticipated bullish rebound once spot demand increases.
From a technical perspective, higher time frame charts exhibit weakness as the monthly close approaches. Historically, the beginning of September carries the highest probability of a correction, so a potential 10% dip from current prices could occur within the first week.
The next immediate support to monitor is around $4,180, but a significant rebound from this level seems less likely, given that the recent breakdown follows an extended bullish phase.
Market participants may instead be psychologically positioning below the $4,000 mark, with the $3,900–$3,700 area corresponding with a daily fair value gap (FVG) that could attract buying interest.
If this zone fails to hold, focus would shift to the next FVG between $3,100 and $3,300. This region could become a crucial inflection point for the continuation of a broader bull market.
A breakdown below this level would signify a substantial shift in the higher time frame structure and could raise doubts about the sustainability of Ether’s ongoing bull cycle.
Related: CoinShares reports 26% AUM increase to $3.46B in Q2
This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.
