32% weekly drop, largest YTD loss

Ethereum is down 32% in a week, with a 18% drop in the last 24 hours, as the cryptocurrency market recorded its biggest decline this year.

Ethereum (ETH) price action is showing a dramatic decline on the daily chart with the current price at $2,350, down 12.35% on the day. This drop has pushed Ethereum below the lower Bollinger Band, a key index that is currently at $2,650, suggesting that the asset may be oversold.

ETH 1D chart – August 5 | Source: crypto.news

Bollinger Bands indicate increased volatility when the bands widen significantly. Ethereum’s position below the lower band usually indicates that the asset is oversold and may be due for a bounce, indicating bearish pressure if the price does not recover soon.

ETH’s On-Balance Volume (OBV) confirms this downtrend. OBV currently stands at 43.49 million and has fallen sharply along with the price drop, suggesting that selling pressure is tangible.

Since greater volume is associated with downward price movements, if ETH’s OBV continues to decline, it will signal persistent selling and the potential for further declines in Ethereum’s price.

ETH weekly chart is in critical condition

The weekly chart shows that Ethereum’s situation doesn’t look much better. The price has dropped below the lower Donchian Channel at $2,111. Currently, the upper and middle Donchian Channels are at $3,977 and $3,044 respectively.

ETH 1W chart – August 5 | Source: crypto.news

This breakout of the lower channel signals a strong downtrend as it shows that price has reached new lows not seen in the last 20 trading periods. A weekly close below this level could signal further downside risk.

Additionally, the Relative Strength Index (RSI) on the weekly chart currently stands at 38.55, down from the recent high of 54.90. If the RSI drops further below 30, it will confirm the oversold condition, potentially leading to a short-term bounce towards or above the $2,800 level.

However, the current trend shows weakening momentum and unless there is a strong reversal, ETH could continue to be under downward pressure.

What will be the next step for Ethereum?

Looking ahead, Ethereum’s immediate future largely depends on its ability to reclaim key support levels. On the daily chart, a recovery above the lower Bollinger Band at $2,650 could stabilize the price.

Meanwhile, a move within the Donchian Channels on the weekly chart, especially above the mid-band level at $3,044, would be a positive sign.

However, if the current bearish momentum continues, we could see Ethereum test lower support levels around $2,000, with further declines possible if broader market conditions remain unfavorable.

Analyst Benjamin Cowen argued that Ethereum could stabilize at current levels in the short term, then experience another decline, especially if macroeconomic conditions such as interest rate cuts play out similarly to past market cycles.

#ETH returned to this trend line

If it follows 2019, it will hold those levels for a few weeks and then fall again after the Fed cuts interest rates.

There are no guarantees, I am just following the most useful analog, which is the best guide so far this year.

Always worth protecting picture.twitter.com/jsSTce8lOl

— Benjamin Cowen (@intocryptoverse) August 5, 2024

Market veteran Peter Brandt also suggests that Ethereum is close to bottoming out. With a rectangle pattern forming between $4,500 and $2,814, the analyst calculates that the downside low is around $2,000, suggesting that this target is almost complete.