The price of Ethereum (ETH) peaked at $3,443 on Tuesday (12) and has since undergone a correction. The asset is trading at $3,063 at the time of publication, with a 3% loss in its value over the past 24 hours.
With the weakening of bullish sentiment, the Ethereum coin price is at risk of a possible drop to the $2,900 price level. This analysis explains why this scenario could play out in the short term.
Read more: Ethereum ETFs – Understand what they are and how they work
Ethereum traders reduce activity
A corresponding drop in trading volume has accompanied Ethereum’s price drop in recent days. In the past 24 hours, its trading volume totaled $35 billion, down 25%.
A price drop indicates that demand for the asset has weakened as sellers outnumber buyers. A simultaneous drop in ETH’s price and volume suggests a weakening momentum, which could signal the end of its bullish trend.
Ethereum Price and Trading Volume. Source: Santiment
Thus, traders often interpret this trend as a lack of conviction among market participants, further discouraging activity and potentially leading to a self-reinforcing cycle of price and volume declines.
Additionally, Ethereum’s open interest fell to a seven-day low on Thursday (14), confirming the decline in market activity. According to data from Santiment, the coin’s open interest, which measures the total number of open contracts in the derivatives market, now stands at $8.26 billion. It has plunged 12% since Monday.
Ethereum Open Interest. Source: Santiment
When open interest declines, existing contracts are closed instead of new ones being opened. During periods of rising prices, a decrease in open interest means that traders are locking in profits or limiting losses by closing their positions.
As with ETH, this occurs near the peak of a price trend, where traders may want to lock in their gains before a potential reversal.
ETH Price Prediction: Coin May Drop Below $3K
Ethereum is trading at $3,063K, hovering just above the critical support level of $2,942K. If market activity remains subdued, the altcoin could test this support. A failure by the bulls to defend this level could lead to a deeper decline towards $2,787K.
Ethereum Price Analysis. Source: TradingView
On the other hand, an improvement in market sentiment and renewed demand could see ETH bounce off the $2,942K support and restart its uptrend. Such a recovery could therefore propel the Ethereum price past the $3,162K resistance level and potentially towards its cycle high of $3,443K.
The article Ethereum Could Drop Below $2,900, According to Analysis appeared first on BeInCrypto.
