Ethereum Traders Predict Sharp Drop to $1.6K

Ethereum (ETH) has staged a notable recovery since its August 5th low of $2,112, climbing approximately 25% to trade above $2,600. However, despite this bullish momentum, analysts remain cautious about the cryptocurrency’s short-term prospects.

Technical analysis offers conflicting perspectives on Ethereum’s price trajectory. While some analysts identify potential resistance levels and bearish chart patterns, others see signs of a potential rebound.

Arete Capital partner McKenna suggests that Ether’s upward movement may be limited in the near term, with a potential range-bound period extending into September. The $2,800 level is seen as a significant resistance zone, where supply congestion could impede further price appreciation.

In contrast, veteran analyst Peter Brandt has outlined two potential scenarios based on different chart formations. The first scenario involves a breakout above $2,960, which could signal a continuation of the uptrend. However, Brandt also highlights the possibility of a bearish breakdown, leading to a price drop towards $1,650.

On-chain data provides additional insights into market sentiment. Ethereum’s funding rates, which indicate the cost of holding long or short positions, have recently turned negative. This suggests a growing prevalence of bearish bets among traders.

While funding rates were generally positive earlier in the year, the recent decline reflects a shift in market sentiment as Ether’s price experienced a sharp correction.

Technical analysis of Ethereum’s price chart reveals a potential bear flag formation. This pattern suggests that the recent rally may be a temporary respite before a renewed downtrend. A breakdown below the lower boundary of the flag, currently around $2,540, could confirm this bearish outlook and lead to a price target of $1,640.

The relative strength index (RSI) also supports a bearish bias, with a reading of around 37 indicating oversold conditions. However, it’s important to note that RSI can sometimes provide false signals, and traders should use it in conjunction with other indicators.

Ethereum’s price action has been characterized by volatility in recent weeks. While the recent rally has offered some respite for investors, the underlying market conditions remain challenging. Analysts are divided on the cryptocurrency’s short-term prospects, with some anticipating further upside and others predicting a potential decline.

The upcoming weeks will be crucial in determining Ethereum’s direction. Traders should closely monitor price action, on-chain indicators, and macroeconomic factors to make informed decisions.