Ethereum (ETH) has experienced a significant surge this week, rising 20% in just seven days. After disappointing expectations over the last couple of months, ETH, the #2 cryptocurrency by market cap, has rallied past $3,500 and is aiming to break through the significant resistance near $3,700. This rally also caps a 41% price increase over the past month, which is an impressive recovery and has caught the attention of traders and holders.
Currently, Ethereum is stuck in a tight range between $3,500 and $3,800. Although there is strong buying interest, the $3,700 zone has proven to be a formidable barrier to break, both technically and psychologically. Each time ETH approaches this level, sellers step in, causing prices to retreat.
A breakout above $3,700 could trigger a rush toward $4,000. But if ETH fails to hold its ground here, we may see a short-term dip or consolidation before the next leg up.
What’s Fueling Ethereum’s Climb?
Several key factors are accelerating the most recent initiative. The rising popularity of Ethereum exchange-traded funds (ETFs) is arguably the most significant development in the cryptocurrency market. With ETF inflows hitting a whopping $7.5 billion in the recent period, we are finally seeing institutions show some interest in ETH as an investment asset.
On-chain activity is also increasing exponentially. The transaction volume on Ethereum is growing by more than 280%. This demonstrates a greater level of interest from users and developers. Ethereum is now also technically set up for a golden cross, which is bullish, in that the 100-day moving average crosses above the 200-day average. Typically, this is a signal of long-term upside – particularly with good fundamentals, which is precisely what we are seeing now.
Meanwhile, long-term ETH holders are holding steady. Many who bought during earlier dips are showing no signs of cashing out just yet, suggesting that confidence in Ethereum’s future remains strong, especially with anticipation building around potential spot ETH ETFs in the US and other major markets.
Futures-Driven Rally Raises Red Flags
Despite all the bullish signs, there’s still reason to be cautious. Upon further inspection, we observe that this current rally is linked to futures activity, rather than spot buying. We witnessed over $267 million in liquidation of ETH futures in the past 24 hours. This means there is a significant amount of market leverage, a potentially dangerous concept. The situation becomes more precarious if a rally is based entirely on leveraged positions. If price momentum stalls, traders may begin unwinding their positions, resulting in sharp corrections.
Analysts caution that for Ethereum to maintain its upward trajectory, spot market participation must increase. Without that, the rally might lose momentum.
Final Thoughts
Ethereum has recently made gains that appear to have solid fundamental backing, as evidenced by ETF inflows, technical strength, and increased on-chain activity. However, the $3,700-$3,800 resistance area is undoubtedly one to monitor. If Ethereum were able to break and stay above that area, the pathway to $4,000 would look open.
However, if not, then a pullback towards $3,500 would most likely occur, where solid support lies.
