Ethereum experienced an impressive 8% surge between Jan. 25 and 30, breaking past the $2,300 mark.
Notably, this surge occurred even as derivatives data and technical indicators show that the price remains weak even as another bearish wave looms for ETH.
Independent analyst The Wall Street Crypto Girl spotted Ether trading just above $2,300 saying,
“The chart shows a bearish pattern for Ethereum, and it looks like the price will go down to $2225 first, and then possibly to $2,130.”
https://x.com/Jennife_romms/status/1752228016422256889?s=20
Reducing demand for for leverage longs
Ethereum’s substantial 20% drop from Jan. 12 highs above $2,700 have pushed its futures open interest to $7.74 billion, down from $9.11 billion reached on Jan.18. Still, in futures markets, leverage longs and shorts are constantly matched, so it’s crucial to examine ETH’s funding rate for a more nuanced perspective.
A positive funding rate indicates that longs (buyers) demand more leverage, while the opposite occurs when shorts (sellers) require additional leverage, resulting in a negative funding rate.
ETH futures average funding rate, 8-hour. Source: CoinGlass
Although Ethereum’s current futures funding rate represents a 1.6% weekly cost for leverage longs is significant given the recent bullish momentum, it is significant shift from the funding rate levels observed at the start of the year when longs were paying for leverage use.
This suggests that the longs are demanding less and less leverage, which could be interpreted as bearish.
Ether’s bearish flag projects ETH price at $1,900
After reaching a low of $2.166 on Jan. 23, ETH price pulled up as buyers bought on the dip and the wider crypto market recovered.
Despite the recovery, a bear flag can be seen on the daily chart, which hints at the continuation of the downtrend.
ETH faces resistance from the flag’s lower boundary at $2,255. A daily candlestick close below this level would signal a possible downward breakout from the chart formation, projecting a drop to $1,900. Such a move would represent a 17% descent from the current price.
ETH/USD daily chart. Source: TradingView
The 50-day exponential moving average (EMA) and the relative strength index (RSI) were both facing downward, suggesting that the market conditions still favored the downside. The price strength at 46 indicated that the bears still dominated the market.
On the other hand, if the bulls push the price above the flag’s upper limit at $2,332, $2,400 would provide the first line of resistance. Additional barriers could emerge from the $2,500 major resistance level. Bulls must overcome this buying pressure from this supplier congestion area before reaching the Jan. 12 swig high above $2,700.
