ETH Correction to $3,000 Incoming After Hitting High of $3,400?

The cryptocurrency market has seen a strong bullish trend following the election of President Trump, with ethereum seeing a significant rise as buyers took control.

However, the market now appears ready for a correction phase to allow for consolidation before further gains.

Technical analysis

By shayan

The daily chart

The influx of new participants and investors on the daily chart has sparked an impulsive uptrend, driving ethereum price above the 100-day and 200-day moving averages. This momentum led to a decisive break above the 200-day moving average at $2,900 and the psychological resistance level at $3,000, a clear indicator of a bullish reversal as the market eliminates short positions.

However, ethereum is now approaching a crucial resistance region around $3,600, a level with significant supply and potential profit taking. Given the strength of this resistance, there is a high probability that a temporary corrective phase will occur to relieve buying pressure, likely pulling back towards the 200-day moving average to establish a more sustainable uptrend.

The 4 hour chart

The 4-hour chart reveals the intensity of the recent rise, which began at the lower boundary of the bearish flag near $2,400. The influx of buying pressure led to a break above the flag's upper boundary, pushing ethereum past the critical $3K mark and invalidating the previous bearish continuation pattern.

This rise shows a clear change in market sentiment, but due to the impulsive nature of the rally, a consolidation phase is expected. A pullback towards the upper boundary of the flag and the $3K support level would allow the market to stabilize, giving participants the opportunity to lock in profits and provide entry points for new buyers.

The current technical setup suggests that ethereum may stop its bullish momentum in the near term. A correction towards $3,000 would support a healthier continuation of the uptrend, giving the market time to recalibrate before attempting to break higher.

Chain analysis

By shayan

ethereum's recent rise to a new yearly high has renewed optimism among market participants, with hopes that a new rally towards an all-time high may be underway. However, analyzing futures market sentiment can provide essential information on possible short-term fluctuations.

When examining the eth futures funding rates, it can be seen that the metric has remained positive in recent weeks, indicating bullish sentiment in the market. This optimism spiked sharply when ethereum crossed the $3,000 threshold, a pattern similar to the March 2024 rally that also led to an ATH.

Although positive funding rates generally indicate healthy demand in a bull market, elevated funding rates can be a red flag. They indicate an overheated futures market, which can create conditions ripe for long liquidation cascades if the price encounters resistance or experiences a pullback.

In the current market climate, with funding rates at elevated levels, the risk of increased volatility and potential corrections increases. An overheated market could trigger rapid sell-offs, especially if the sell-offs are triggered by profit-taking or minor corrections. Investors should therefore manage risk carefully, anticipating short-term fluctuations and preparing for potential volatility.

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