Ethereum (ETH) has encountered significant headwinds following a bearish breakout from a five-month rectangle pattern. Despite holding onto the crucial support level at $2,611, the short-term sentiment remains decidedly bearish. The release of positive U.S. Consumer Price Index (CPI) data on 14 August turned out to be a classic sell-the-news event, leading to a broad sell-off in the cryptocurrency market. As a result, Ethereum has dropped by 4% in the past 24 hours, trading at $2,622 at the time of writing.
Analyst Predictions and Market Reactions
Renowned analyst Peter Brandt has forecasted further challenges for Ethereum, citing the completion of a five-month rectangle pattern on 4 August. During this period, ETH’s price was range-bound, eventually breaking out bearishly and establishing a key resistance level at $2,933. On 14 August, ETH attempted to rally past this resistance but failed, with the intraday chart’s rising wedge pattern indicating weakening momentum and a potential bearish reversal. Brandt has predicted a drop to $1,652 and has taken a short position targeting this decline. He also noted that the bearish outlook would be invalidated if ETH moves above $2,961.
Technical Indicators and Market Confidence
Technical indicators are painting a bearish picture for Ethereum in the short term. The Chaikin Money Flow (CMF) is at -0.09, reflecting selling pressure and a lack of market confidence. The CMF has remained flat, suggesting that buyers are hesitant to open new positions. Additionally, the Bollinger Bands have widened, indicating increased volatility during the downtrend. Over the past day, ETH’s price has moved from the upper band to the lower band, signaling a sharp bearish reversal.
Crucial Support Levels and Potential Risks
Ethereum is currently holding a crucial support level at $2,611. If this support fails, ETH could drop to the 1.618 Fibonacci level at $2,521. The price range between $2,614 and $2,800 is particularly important, as many addresses that bought at these levels are “At the Money.” A drop below this range could trigger additional selling pressure as traders seek to minimize their losses.
Futures Market Sentiment
A closer look at the Futures market reveals that traders are increasingly betting against Ethereum. The Long/Short Ratio stands at 0.90, indicating that more traders are taking short positions and abandoning long positions. This sentiment is further supported by a 3% drop in Open Interest (OI), which has steadily declined from over $14 billion at the beginning of the month to the current $10 billion. This decline in OI suggests that Futures traders are less convinced about ETH’s price prospects.
Looking Ahead
The bearish breakout and subsequent market reactions highlight the challenges Ethereum faces in the short term. While technical indicators and market sentiment point to further declines, the crucial support levels and potential for a trend reversal remain key factors to watch. Investors and traders should remain cautious and closely monitor these developments as they navigate the volatile cryptocurrency landscape.
