After reaching $4,109, Ethereum [ETH] encountered significant downward pressure, leading to a decline to as low as $3,095, marking a 16.48% drop over the past week.
Despite this recent downturn, Ethereum appears poised for a resurgence towards $3,300. The cooling of Ethereum’s funding rate following two rejections at $4,000 indicates a potential comeback.
Ethereum’s Futures Market Behavior Post $4k Rejection
Reports from Cryptoquant reveal that Ethereum’s inability to surpass the $4,000 resistance level triggered substantial liquidations in the futures markets, causing a market crash and pushing ETH to lower levels. However, the failure to maintain the $4,000 threshold led to a correction in the funding rate, setting a healthier environment for a bullish trend.
This adjustment may pave the way for a sustainable rally in the upcoming weeks, mirroring a historical pattern observed in January 2024 when similar market conditions prompted a significant uptrend in Ethereum from $2,169 to $4,091.
Analysis of Ethereum Charts
While Ethereum faced notable downward pressure recently, indicators suggest a potential recovery on the horizon. The stock-to-flow ratio for Ethereum surged from 2.19 to 24.67 over the past week, signaling increased scarcity due to substantial accumulation by large investors.
Moreover, the decline in Ethereum’s MVRV Z score ratio to 0.745 indicates undervaluation, attracting long-term holders to accumulate and thereby increasing buying pressure, ultimately leading to a price increase.
Furthermore, the Bitmex basis ratio for Ethereum rose from -0.22 to 0.07 recently, reflecting optimism in the futures market as traders anticipate a price rebound after the recent dip.
Probability of a Recovery
The bullish sentiment in the futures market, along with growing spot demand, suggests a potential recovery for Ethereum. If conditions remain favorable, ETH could surpass the $3,300 mark and target higher resistance levels, potentially reaching $3,900.
However, a strong bearish presence could hinder this recovery, possibly leading to a drop back to $3,160 if the bulls fail to regain control of the market.