Ethereum has been experiencing a significant downturn, with a sharp decline in price following a pullback to the lower boundary of a broken wedge pattern. This decline has been further confirmed by the formation of a death cross, where the 100-day moving average crosses below the 200-day moving average. The overall sentiment in the market has been one of fear and uncertainty, as evidenced by the low inflows into spot ETH ETFs and reduced investor interest. The rejection at the lower boundary of the multi-month wedge and the 0.5-0.618 Fibonacci levels has further added to the bearish pressure on Ethereum, highlighting the strength of sellers in the market.
Despite the bearish trend, Ethereum is now approaching a critical support zone, marked by the static $2.1K level and the 0.786 Fibonacci retracement level at $2,067. This support area is expected to attract substantial demand, potentially leading to a short-term sideways consolidation before the next move for Ethereum is determined. The resistance zone between the 0.5 ($2.6K) and 0.618 ($2.7K) Fibonacci levels has firmly rejected ETH, leading to continued downward momentum towards the $2.1K support. This level has previously held in early August, suggesting it may attract buyers looking to accumulate at lower price points.
The value of Ethereum is fundamentally linked to its decentralized network and the active engagement of its users. One key metric to gauge this engagement is the number of unique active addresses on the network, which serves as a proxy for Ethereum’s market demand and valuation. The 14-day moving average of Ethereum Active Addresses has shown a rapid decline since late March 2024, indicating a drop in user activity and transaction volumes. This downward trend reflects a bearish market sentiment, with reduced demand and lower investor participation. For Ethereum to recover and potentially start a sustainable rally, this trend must reverse.
The coming days will be crucial in determining Ethereum’s next move. If demand resurfaces at the $2.1K support level, there could be a temporary consolidation phase, halting the downward pressure on the price. However, a breach of this crucial support level could trigger a long-liquidation event, potentially driving the price down towards the $1.8K region. To reverse the current bearish trend, Ethereum needs to see a resurgence in the number of active addresses on the network, indicating growing interest and accumulation of ETH. This would signal a more robust demand and the potential for a bullish market reversal in the future.
Ethereum is currently facing significant challenges with a bearish trend and a lack of active engagement from users. The upcoming days will be critical in determining whether Ethereum can hold its support level and reverse its current downward trajectory. By analyzing the market sentiment and key technical levels, investors can gain valuable insights into the future direction of Ethereum and make informed decisions regarding their investments in the cryptocurrency.
