Ethereum Bull Run Cracks as RSI, Signals Flash Warning
Ethereum (ETH) has been the best performer in the crypto market so far this month, gaining over 50% while the broader market climbed only 15.25%.
As a result of this surge, Ethereum’s dominance is edging closer to a psychologically important 10% level, last hit in March. Although the market is bullish, technical indicators are showing that the current move might not have a lot of power left.
ETH Market Share Risks Short-Term Drop
Ethereum’s daily RSI, used to measure momentum, is now at its most overbought since May 2021, an important milestone. In the past, these very high RSI readings have typically been followed by declines in Ethereum’s market dominance.
One example is July 2024, when ETH.D achieved a close to today’s RSI level and then dropped by more than 17.5% in the following 10 months.
With RSI moving above 80 and ETH.D not having cleared its 200-day EMA yet, analysts think a pullback is possible. Ethereum’s past efforts to rally have met resistance at the 200-day EMA time and again, and this pattern could happen again now.
Technical analyst Clara Yin said that, repeating last year’s pattern, Ethereum’s market share could fall toward the 50-day EMA currently at 8.24%: “A move down to the 50-day EMA would show ETH.D is losing strength in the short term and investors may choose other digital assets.”
ETH Faces Potential 15% Price Drop
Further signs of weakness are turning up on the ETH/USD chart. On the four-hour timeframe, Ethereum is developing a divergence: Although ETH’s price is climbing to new highs, the most important indicators are moving down.
According to AlphaBTC, a crypto trader, the ‘three drives of divergence’ pattern often means a trend is coming to an end. He also pointed out that important Fibonacci levels could act as support in the event of a price decline.
The ETH price is at the moment close to the $2,740 Fibonacci extension point. If selling happens, analysts believe ETH could fall toward $2,330 and $2,190, which means a fall of 10%-15% from now.
Yet, some analysts are not afraid of a big and long-term dip. Michaël van de Poppe, an independent market strategist, thinks traders could consider buying Ethereum if it dips. Van de Poppe said this could just be a normal dip in an ongoing positive trend. He thinks Ethereum’s next move will be moving toward $3,500 within the following months.
During this important point for Ethereum, investors and traders should keep a careful eye on the market. Even if the bigger picture is promising for ETH, the coming weeks will help show if the rally can continue or if a retracement is on the horizon.
