Ethereum’s recent price action highlights a mix of bullish momentum and cautious consolidation as the price approaches the critical resistance level of $3.5K.
A breakout of this level could pave the way for a sharp rebound, but the possibility of continuing the consolidation phase remains.
Technical Analysis
Daily chart
Ethereum’s upward trajectory was marked by a corrective retracement, finding support at the 200-day moving average around $3K. This area acted as a significant support, and the increase in buying activity pushed the asset back towards the critical $3.5K resistance, which coincides with the previous swing high.
Despite the renewed bullish momentum, the $3.5K threshold represents a decisive supply zone. If buyers overcome this resistance, Ethereum could continue to climb towards all-time highs. However, failure to break through this level could lead to the market digesting recent gains and a prolonged consolidation phase.
4-hour chart
The 4-hour timeframe provides a clearer picture of Ethereum’s bullish structure, showcasing a massive surge that led to the $3.5K resistance level. Following this move, the price consolidated, forming a rising wedge pattern. This pattern is generally considered bearish, indicating a potential distribution phase.
Additionally, the bearish divergence between price and the RSI indicator suggests weakening momentum. Combined with supply pressure at $3.5K, this could increase the likelihood of consolidation or a minor pullback.
Still, the cryptocurrency market remains unpredictable, and the influx of large numbers of participants could trigger a sudden surge in prices. Such movements could cause a cascade of short liquidations that could quickly push prices higher. Given these dynamics, traders should proceed with caution and closely monitor market conditions during this critical stage.
On-chain analysis
Ethereum continues to form higher highs and higher lows, gradually approaching the $3.5 resistance level. However, its inability to break through these key levels, either above $3.5 or below $3, will strongly affect market liquidity.
The heatmap shows that a large amount of liquidity is located below the $3K level, likely coming from stop orders and liquidations from large market participants, including whales. This explains why prices are strongly defended above this level. Whales and other significant players appear to be actively preventing violations, as such events would trigger a liquidation cascade, forcing them to incur losses.
Likewise, the $3.5K area also holds considerable liquidity, representing a concentration of sell orders and a level of liquidation of short positions. This liquidity turns the $3.5 mark into a strong resistance, with sellers and profit takers dominating around this level. However, a breakout above this level could trigger a cascade of short liquidations, driving a rapid surge in the price of Ethereum. The price of Ethereum is currently fluctuating between these two important liquidity areas, forming a consolidation phase. A breakout in either direction could significantly amplify market volatility.
