Key Takeaways
The high spot inflows and corporate buying fueled the bullish conviction behind Ethereum’s rally, but an overheated futures market could see a pullback from just above the $4,000-level.
Ethereum [ETH] saw an overheated RSI and 95% supply in profit, both of which hinted at an exhausted market. Profit-taking activity could stall further bullish momentum, but large participants have continued to add to their holdings lately. The high spot ETF inflow helped explain the surge in Ethereum’s price too.
Derivatives dominated ETH’s daily trading volumes, which added to the fears that the move could be a bubble. The surging basis highlighted the demand for leveraged long positions on ETH. Without high spot activity, the risk of a deep pullback will only increase.
Is Ethereum set to retrace its gains soon?
Source: ETH/USDT on TradingView
On the weekly chart, there were two lower highs that Ethereum has made since November 2024 that were key to recovery. They were the $2,850 and $3,750 levels, marked in white. In fact, Ethereum appeared to be on the verge of breaking past the second key resistance, which would further signal bullish conviction.
However, traders need to be slightly cautious. Ethereum has recorded gains for seven consecutive days, rallying by 27.4%. The $3,750-region seemed to be a liquidity pocket that could see a bearish short-term reversal too.
The technical indicators did not yet show it though. For instance – The RSI was not yet in overbought territory, and the CMF was yet to step out beyond the +0.05-level.
The liquidation heatmap of the past year highlighted the $3.8k region and the $4.1k region as the next magnetic zones.
These may be zones that could see Ethereum’s trend halt, while also initiating a pullback. To the south, there were a few significant liquidity pockets until the $2k-mark too.
The 1-month chart offered some more clues. It also highlighted the sparse liquidity to the south. This meant that Ethereum may be highly likely to surge to the $4.1k resistance soon. It was previously tested in December 2024, which began the bearish reset that lasted almost five months.
It’s possible that Ethereum consolidates around the $4k-mark for a while, before its next leg higher. The liquidity to the south was at $3.5k and $2.8k, which might not be tested anytime soon unless Bitcoin [BTC] faces a sell-off and falls below $116k.
Disclaimer: The information presented does not constitute financial, investment, trading, or other types of advice and is solely the writer’s opinion
