Important points:
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Ether consolidated near $4,000 as a lack of futures demand and weak ETF flows signaled the absence of bullishness.
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Ethereum’s declining network fees and activity suggest a decline in on-chain demand.
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Analysts have warned that if support at $4,000 is not regained soon, it could fall to $3,500.
Ether (ETH) has been hovering around $4,000 for the past two weeks, in a period of consolidation following the flash crash that dropped below $3,500 on October 11th.
Ether traders are currently assessing the possibility of further bullish momentum following the US Federal Reserve’s confirmation of a 0.25% interest rate cut and the end of quantitative tightening.
Ether price lacks sustained bullish momentum
Ether futures are currently trading at a 5% premium compared to the standard Ethereum spot market, reflecting lower demand from leveraged buyers.
Related: Early Ethereum whale stirring? Data shows old ether is on the move
In neutral market conditions, futures premiums typically range from 5% to 10% to allow for longer settlement periods. More worryingly, the recent rally to $4,250 did not restore sustained bullish sentiment among traders.
The bearish trend in Ether futures coincided with outflows from U.S.-based Ethereum spot exchange-traded funds (ETFs), which have been dominant since mid-October.
ETF net inflows of $380 million on Monday and Tuesday did little to generate bullish momentum, leaving traders questioning whether ETH’s $10,000 price target will remain realistic this cycle.
While this issue is affecting the entire crypto market, Ethereum’s inability to cross $4,000 could also be due to the decline in Ethereum’s network fees.
Ethereum chain fees in the past seven days totaled $5 million, down 16% from the previous week. By comparison, BNB chain fees have fallen by 30% and Tron has fallen by 16%. The number of active addresses on Ethereum’s base layer decreased by 4% over the same period, while Tron saw an increase of over 100%.
“Classic bear trap” or will ETH price fall?
Data from Cointelegraph Markets Pro and TradingView shows that Ether price has recorded three consecutive red candlesticks on the daily chart.
Several attempts at recovery have been rejected by the $4,000 resistance level, leaving traders wondering if Ether’s bull run is over or if the altcoin is undergoing a technical correction.
“$ETH has once again lost the $4,000 support level,” analyst Ted Pillows said in an X-Post on Thursday.
Pillows noted that Ethereum is still declining despite “the Fed’s 0.25% interest rate cut, the end of QT, and the US-China trade talks” all happening in the past 24 hours.
The attached chart shows that ETH’s next line of defense is $3,800, a loss of which would trigger further selling, first toward the $3,500-$3,700 demand zone and then toward the August 3rd low of $3,354.
On the upside, a recovery above $4,000 would prompt bulls to focus on the $4,200 and $4,500 barriers before a return to all-time highs above $5,000.
Ted Pillows added:
“This is either a classic bear trap or the crypto market is going to drop significantly.”
Fellow analyst Fibonacci Trading said, “A drop to $3,300 would still be seen as a healthy return within the uptrend maintained by the EMA cloud,” as shown on the weekly chart below.
“If the bulls can protect their support here and prepare for the next attack on the resistance, it will be a show of true strength.”
As long as the bulls hold the $3,800-$4,200 support area, Ether’s rally is on track and “we still expect a strong fourth quarter,” according to pseudonymous analyst Cactus.
As reported by Cointelegraph, the bulls need to push the price above the 50-day SMA of $4,200 to show strength and confirm the start of the next uptrend.
This article does not contain investment advice or recommendations. All investment and trading moves involve risk and readers should conduct their own research when making decisions.