After the 4th Bitcoin halving was completed, recovery of Ethereum following rejection at $3.7K will occur in the coming days. The decrease in Open Interest, combined with recent price movements, suggested a potential downtrend for Ethereum (ETH).
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Recovery of Ethereum Following Rejection
At the time of writing, ETH was trading at $3.2k, with the $3k level being breached several times since April 13th on shorter timeframes, indicating weakened sentiment towards the leading altcoin.
https://coinmarketcap.com/currencies/ethereum/
The significant drop in Open Interest, along with recent price trends, indicated the possibility of a downtrend. However, the defense of the $3k level on longer timeframes also hinted at the potential for a bullish resurgence. AMBCrypto examined on-chain data to determine which scenario was more likely.
Historical Pattern 2021 Bullrun
During the last bull market, in mid-February 2021, ETH’s price corrected from an all-time high (ATH) of $1.9k to $1.4k, followed by a rapid recovery. This historical pattern suggested that the futures market can become overheated at times.
Impatient bulls often rush to long positions with leverage, which can lead to short-term gains. However, when spot demand wanes and long positions become too dominant, a reset is often necessary.
The drop in Open Interest from $10 billion to $7.17 billion in April may have been another such reset. Whether a V-shaped reversal would occur this time remained uncertain, especially considering the recent selling pressure on Bitcoin.
Decline in user adoption and sentiment
Weighted social sentiment was largely positive in February and part of March but turned negative as prices corrected. This shift in sentiment could be related to high gas fees on the Ethereum network before the price peak. Network growth metrics also slowed down in the past three months, indicating a decrease in demand.
Any uptick in these metrics would likely follow an uptrend rather than precede it. The 90-day mean coin age has steadily increased since March 27th, indicating widespread accumulation of ETH across the network.
Meanwhile, the 30-day MVRV ratio has been negative for almost a month, suggesting that most holders are currently at a loss. Despite the uncertainty, climbing back above the $3.3k resistance could boost confidence among swing traders and investors, potentially leading to further gains.
https://app.santiment.net/s/9a9B_3GC
Conclusion
To conclude, recovery of Ethereum following rejection at $3.7k is anticipated in the coming days, supported by the historical pattern of rapid rebounds after corrections. While a downtrend is possible due to decreased Open Interest and weakened sentiment, the defense of the $3k level on longer timeframes suggests a potential bullish resurgence. Climbing back above the $3.3k resistance could bolster confidence among traders and investors, paving the way for further gains.
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