Recently, Ethereum has experienced a significant bearish trend, characterized by a sharp decline in price after retracing to the lower boundary of a broken wedge pattern. This decline has been further emphasized by the formation of a death cross, indicating a bearish market sentiment among investors. The lack of inflows into spot ETH ETFs has also highlighted reduced investor interest in Ethereum, contributing to the negative outlook for the cryptocurrency.
As Ethereum approaches a crucial support zone, defined by the static $2.1K level and the 0.786 Fibonacci retracement level at $2,067, there is a possibility of a short-term sideways consolidation in the market. This support area is expected to attract substantial demand, potentially pausing the current downtrend and leading to a period of consolidation before the next price movement is determined.
On the 4-hour chart, Ethereum faced a strong rejection from the resistance zone between the 0.5 ($2.6K) and 0.618 ($2.7K) Fibonacci levels, resulting in continued bearish momentum towards the $2.1K support level. This support level has previously held, particularly in early August, suggesting that buyers may step in to accumulate Ethereum at these price points. However, if the $2.1K support is breached, it could trigger a long-liquidation event, potentially pushing the price down towards the $1.8K region.
One crucial metric for evaluating Ethereum’s value is the number of unique active addresses on the network. This metric serves as a proxy for Ethereum’s market demand and overall valuation. The 14-day moving average of Ethereum Active Addresses has shown a significant 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 see a sustained rally, there needs to be a reversal in this trend, with a resurgence in the number of active addresses signaling increased interest and accumulation of Ethereum.
Ethereum is currently facing a challenging market environment, with a strong downtrend, lack of investor interest, and declining engagement metrics. The upcoming days will be crucial in determining whether Ethereum can hold its critical support levels and potentially reverse the current bearish trend. Investors and traders alike should closely monitor key price levels and engagement metrics to gauge the cryptocurrency’s future performance in the market.