While the cryptocurrency market has been enjoying a robust uptrend since President Trump’s election, Ethereum leads the pack with a significant surge in its value. The boom in Ethereum’s price is largely attributed to an influx of new participants and investors. However, market analysts have started to see signs suggesting that the market may be preparing for a correction phase, a typical occurrence following such dramatic increases to allow for consolidation before further gains.
Ethereum’s daily chart reveals an impulsive uptrend, pushing its price above both the 100-day and 200-day moving averages. The momentum was so strong that it led to a decisive breach above the $2.9K mark, representing the 200-day MA, and the psychological $3K resistance level. Such a shift clearly points to a bullish market as it proceeds to flush out short positions.
Nevertheless, Ethereum is now coming up against a crucial resistance region around the $3.6K mark. This level is known for substantial supply and potential profit-taking. Given the sturdiness of this resistance, a temporary corrective phase is expected to alleviate the buying pressure, most likely pulling the price back toward the 200-day MA to establish a more sustainable uptrend.
The 4-hour chart offers an even closer look at the recent surge, which originated at the bearish flag’s lower boundary near $2.4K. The rush of buying pressure led to a breakout above the flag’s upper boundary, propelling Ethereum past the critical $3K mark and invalidating the previous bearish continuation pattern.
While this surge signals a clear shift in market sentiment, the impulsive nature of the rally suggests a consolidation phase could be imminent. A pullback toward the flag’s upper boundary and the $3K support level would allow the market to stabilize, providing a window for participants to lock in profits and offering entry points for new buyers.
On-chain analysis of Ethereum suggests a renewed optimism among market participants, with hopes that a new rally toward an all-time high may be on the horizon. However, the futures market sentiment can provide valuable insights into potential short-term fluctuations.
A closer look at the funding rates for ETH futures shows that the metric has remained positive in recent weeks, signaling a bullish sentiment in the market. However, elevated funding rates can be a red flag, indicating an overheated futures market, which can create conditions ripe for long liquidation cascades if the price encounters resistance or experiences a pullback. With funding rates at heightened levels, the risk of increased volatility and potential corrections rises, leading to potential rapid sell-offs. Hence, investors are advised to manage risk carefully, anticipating short-term fluctuations and preparing for potential volatility.
