On Tuesday, Ethereum (ETH) price peaked at $3,443, but has since seen a correction. At the time of writing, the price is trading at $3,063, down 3% over the past 24 hours.
With the bullish signal fading, Ethereum price is at risk of falling to $2,900. This analysis explains why this scenario is likely in the short term.
Ethereum Traders Decrease Activity
The decline in Ethereum's price over the past few days has been accompanied by a drop in trading volume. In the past 24 hours, total trading volume reached $35 billion, down 25%.
The price drop indicates that demand for the asset has weakened as sellers outnumber buyers. The simultaneous decline in ETH price and volume signals weakening momentum, which could mark the end of the uptrend.
ETH price and trading volume. Source: Santiment
Traders often interpret this trend as a lack of determination from the market community, reducing activity and potentially leading to a self-reinforcing cycle of falling prices and volume.
Furthermore, Ethereum’s open interest fell to a seven-day low on Thursday, confirming a decline in market activity. According to data from Santiment, the coin’s open interest, which measures the total number of outstanding contracts in the derivatives market, currently stands at $8.26 billion. It has fallen 12% since Monday.
Ethereum Open Interest. Source: Santiment
When open interest falls, existing contracts are being closed instead of new ones being opened. During bullish periods, a drop in open interest indicates that traders are locking in profits or limiting losses by closing their positions.
As in the case of ETH, this happens near the top of a price trend, when traders tend to protect profits against a potential reversal scenario.
ETH Price Prediction: Coin Targets Below $3,000
Ethereum is trading at $3,063, hovering just above the key support level at $2,942. If market activity continues to be subdued, the altcoin could test this support level. Failure by bulls to defend this level could lead to a deeper decline towards $2,787.
Ethereum Price Analysis. Source: TradingView
Conversely, an improvement in market sentiment and renewed demand could see ETH rebound from the $2,942 support and restart the uptrend. This recovery could push Ethereum above the $3,162 resistance and potentially reach the cycle top at $3,443.
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