Ethereum Hits New High, Faces Correction: Technical Analysis

Ethereum has recently achieved a new high for the year, breaking through the significant resistance level of $4K. However, this milestone was followed by a noticeable correction. The question now is whether this correction is temporary or the start of a broader reversal in the bullish trend.

The Daily Chart

An analysis of the daily chart shows a prevailing bullish sentiment surrounding Ethereum. There was a strong upward surge that surpassed the critical resistance at $4K, indicating increased interest from market participants and higher volatility.

After briefly surpassing the $4K resistance level, the price faced selling pressure, leading to a decline toward the support zone around $3.5K. It is expected that this region will provide support and initiate a fresh rally.

If there is a continued corrective retracement, Ethereum’s price is likely to find support at key levels within the Fibonacci retracement, specifically between the 0.5 ($3,181) and 0.618 ($2,966) levels.

The 4-Hour Chart

Further examination of the 4-hour chart confirms the presence of buyers in the Ethereum market. The price reached its highest level since April 2022, accompanied by increased market volatility and significant buying interest aimed at surpassing the previous all-time high of $4.8K.

However, after breaking above $4K, the price faced rejection and experienced a sharp decline towards key support zones around $3.5K and $3.3K. An expanding bearish divergence between the price and the RSI indicator suggests a potential market correction.

Nevertheless, healthy bullish markets often go through periods of consolidation correction to rest and rebuild demand. It is likely that the price will find medium-term support and continue its overall upward trend.

On-chain Analysis

Ethereum’s rapid price surge has attracted speculators to the market, driving up buying pressure and instilling confidence among investors. The open interest, which quantifies the number of outstanding perpetual futures contracts across various crypto exchanges, has reached unprecedented levels.

This surge in open interest indicates the intensity of both long and short positions in the perpetual futures market, creating an overheated environment. While elevated open interest is typical in a robust bull market, it can also contribute to increased volatility and unexpected market corrections.

Investors should carefully manage their risk in the short term due to the heightened volatility resulting from the high open interest.

Hot Take: Ethereum’s Future Amidst Correction

Ethereum’s recent correction after hitting a new high raises questions about its future trajectory. Here are some key points to consider:

The correction could be a temporary setback or the beginning of a broader reversal in the bullish trend.
The daily chart shows a prevailing bullish sentiment with support expected around $3.5K. If the correction continues, key support levels within the Fibonacci retracement at $3,181 and $2,966 may come into play.
The 4-hour chart confirms the presence of buyers but also indicates a potential market correction. It is important to recognize that healthy bullish markets often experience periods of consolidation correction.
On-chain analysis reveals an overheated environment with unprecedented levels of open interest. While this is typical in a strong bull market, it can contribute to increased volatility and unexpected corrections.

Overall, while Ethereum faces a correction, it is likely to find support and continue its upward trend in the medium to long term. However, investors should be cautious and manage their risk due to the heightened volatility in the market.