ETH correction to $3000 incoming after $3400 high?

The cryptocurrency market has seen a strong bullish trend following the election of President Trump, with Ethereum seeing a significant rise as buyers take control.

However, the market now looks set for a correction phase that will allow for consolidation before further gains.

Technical Analysis

By Shayan

The daily chart

The influx of new entrants and investors on the daily chart has led to an impulsive uptrend, which has pushed the price of Ethereum above the 100- and 200-day moving averages. This momentum led to a decisive break above both the 200-day MA at $2.9K and the psychological resistance level at $3K, a clear indicator of a bullish shift as the market sheds short positions.

However, Ethereum is now approaching a crucial resistance region around $3.6K, a level with significant supply and possible profit taking. Given the strength of this resistance, there is a high probability of a temporary corrective phase to ease the buying pressure, which is likely to pull back towards the 200-day MA to establish a more sustainable uptrend.

The 4 hour chart

The 4-hour chart reveals the intensity of the recent rally, which began at the lower limit of the bearish flag near $2.4K. The influx of buying pressure led to a break above the upper limit of the flag, pushing Ethereum past the critical $3,000 mark and invalidating the previous bearish continuation pattern.

This increase shows a clear change in market sentiment, but due to the impulsive nature of the rally, a consolidation phase is expected. A pullback to the upper limit of the flag and the $3,000 support level would stabilize the market, giving participants an opportunity to lock in profits and provide entry points for new buyers.

The current technical setup suggests that Ethereum may halt its short-term bullish momentum. A correction towards $3,000 would support a healthier continuation of the uptrend, giving the market time to recalibrate before attempting to move higher.

Onchain analysis

By Shayan

Ethereum’s recent surge to a new yearly high has renewed optimism among market participants, with hopes that a further rally to an all-time high could occur. However, futures market sentiment analysis can provide essential information about potential short-term fluctuations.

Examining ETH futures funding rates, it can be seen that the metric has remained positive over the past few weeks, indicating bullish sentiment in the market. This optimism rose sharply when Ethereum crossed the $3,000 threshold, a pattern similar to the March 2024 rally that also led to an ATH.

While positive financing rates generally mean healthy demand in a bull market, high financing rates can be a red flag. They indicate an overheated futures market, which can create conditions ripe for long liquidation cascades if the price finds resistance or experiences a pullback.

In the current market climate, with funding rates at higher levels, the risk of increased volatility and possible corrections increases. An overheated market could lead to rapid selling, especially if sell-offs are triggered by profit-taking or minor corrections. Therefore, investors should manage risk carefully, anticipating short-term fluctuations and preparing for potential volatility.

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