Key points:
Ethereum struggled to surpass $4,800, resulting in a 3% correction due to bearish divergence.
Spot selling pressure has increased, yet leveraged traders continue to engage.
A rebound from $4,400 could restore bullish momentum towards new highs.
On Monday, while Bitcoin (BTC) reached a new all-time high, Ether (ETH) was unable to break through its resistance at $4,800, leading to a significant 3% drop below $4,500 on Tuesday. This decline was accompanied by a bearish divergence seen on the four-hour chart, which usually indicates diminishing buyer strength, often preceding a local peak or short-term reversal.
ETH tested the $4,500 mark again, with onchain and derivatives data presenting mixed signals. Although the spot cumulative volume delta (CVD) has dropped significantly, indicating net selling pressure in the spot market, futures open interest and futures CVD remain high. This implies that leveraged traders are still active and preparing for volatility, even as spot buyers take profits.
These scenarios typically attract sidelined participants looking for liquidity-driven entries rather than impulsive actions. A potential liquidity sweep close to $4,400, where stop orders are often clustered, could act as a short-term reset. A robust rebound from this level would invalidate the bearish outlook and signal renewed bullish momentum this week.
Conversely, if ETH fails to hold this region, the correction might extend towards $4,250 to $4,100, where both a four-hour and one-day order block overlap. These overlapping zones often represent areas of high interest for demand, making them critical levels for potential trend reversals.
Related: XRP experiences highest ‘retail FUD’ since Trump tariffs: Is a significant sell-off imminent?
“Liquidity lag” for Ether may be decreasing
Per XWIN Research, the US M2 money supply—a gauge of liquidity within the economy—has surged to a record $22.2 trillion. While Bitcoin has risen over 130% since 2022 due to this liquidity influx, Ether has only seen a 15% increase, highlighting a “liquidity lag.”
Nonetheless, various onchain metrics suggest that Ether may be making up ground. Exchange reserves have decreased to approximately 16.1 million ETH, down over 25% since 2022, indicating a persistent decline in selling pressure. Negative net exchange flows show that ETH is moving into self-custody and staking, thus reducing the available supply.
Crypto trader Skew pointed out that the recent rally marked the “fourth tap” of the $4,700-$4,800 zone. If ETH manages to maintain this area, “that would be quite bullish.” Otherwise, a deeper retreat could create a higher low, potentially setting the stage for the next upward movement.
Related: Altcoin prices increase as USDT dominance declines: Is ‘altseason’ upon us?
This article does not offer investment advice or recommendations. All investment and trading actions involve risk, and readers are encouraged to conduct their own research prior to making a decision.
