Ethereum (ETH) price showed strength despite Bitcoin's brief pullback on Monday. Is this faux strength?

A closer look at technical analysis and on-chain data indicates clear signs of exhaustion and a potential crash to $2,000.

Ethereum (ETH) price showed strength despite Bitcoin’s brief pullback on Monday. However, a closer look at technical analysis and on-chain data indicates clear signs of exhaustion and a potential crash to $2,000.

What Happened: At press time, Ethereum trades at $2,638 and is up 3.10% for the day. Due to the recent uptick, the market cap of ETH stands at around $318 billion.

On the daily chart, Ethereum’s price has been oscillating between $2,323 and $2,738 with signs of bullish exhaustion. While ETH produced almost equal highs in the past two weeks, the momentum indicators like RSI and AO produced lower highs. This non-conformity is termed bearish divergence and hints at ETH price pulling back shortly.

The Relative Strength Index (RSI) has also dropped below the overbought zone. The Awesome Oscillator (AO) indicator is approaching the mean level with decreasing red histogram bars, denoting a decline in momentum, similar to the RSI.

The chances of reversal are also high, considering that Ethereum’s price also tagged the February 22 supply zone, extending from approximately $2,800 to $2,600. In trading terminology, a supply zone refers to an area where a significant spike in sell orders has previously led to a steep correction. A retest of this area usually leads to a sharp rejection if the buying pressure is weak.

The key levels to watch if Ethereum price begins its correction here include the weekly bullish breaker, spanning from $1,800 to $2,100. A revisit of this level is likely considering the aforementioned bearish divergence.

Related Link: Bitcoin Breathes, But Can It Escape The Graveyard At $23K This Time?

Why It Matters: Open Interest (OI) for Ethereum has increased by $1.36 billion in nine hours or less. With a current price of $3,000 just 13% rally away, the rapid addition of leveraged products is evident.

Typically, when leverage is ramped up at such a rate, markets tend to reverse to cull eager participants. Hence, the second sell signal also indicates that a drop in Ethereum price is highly likely.

Furthermore, Santiment’s 30-day MVRV Ratio (Market Value to Realized Value) stands at 24%. This figure represents the average unrealized profit of ETH investors who purchased a month ago.

Usually, spikes into the 10% to 20% ‘danger zone’ often lead to reversals as these investors book their profits.

To conclude, the short-term profit-taking potential, coupled with a significant increase in Open Interest, suggests an overextended and overleveraged move for Ethereum price. These two indicators lend credence to the bearish divergence noted on the daily chart, which hints at a correction to the next key support level of $2,000.

For a long-term price prediction of Ethereum 2030-2050: Read This

Frequently Asked Questions (FAQs)

1. What is Ethereum's current price and market cap?

As of Monday morning, Ethereum's price is hovering around $2,638, with a 24-hour trading volume of $18.33 billion. This positions Ethereum at the second-largest cryptocurrency, boasting a market capitalization of approximately $318 billion.

2. What are the sell signals indicating for Ethereum's price?

A technical analysis of Ethereum's price suggests that the positive trends might be exhausting, hinting at a potential correction. The RSI has dropped from the overbought zone and the Awesome Oscillator is approaching the mean level with decreasing red bars, indicating a decline in momentum. Additionally, Ethereum's price has tagged the February 22 supply zone, which might lead to a sharp rejection if the buying pressure weakens.

3. What is the potential support level for Ethereum's price if it corrects?

If Ethereum price corrects, it might find support at the weekly bullish breaker, extending from $1,800 to $2,100, which was breached in November 2022 during Bitcoin's final attempt at a bottom. This level could be a key determinant of the next major trend for Bitcoin and, in turn, Ethereum. A revisit of this level is likely considering the bearish divergence and the Open Interest (OI) in the ETH perpetual futures market.