Ethereum has extended its downtrend and is currently trading within a significant multi-month demand block. With liquidity being aggressively flushed up and down the price, ETH is approaching a key decision point where either a bailout rally or a deeper capitulation into a low demand zone could unfold.
technical analysis
Written by Shayan
daily chart
ETH continued its sharp correction, dropping from the $3.5 million to $3.6 million supply zone and falling decisively below both the 100-day and 200-day moving averages. This breakdown places the asset directly within the $2,7,000 to $2,85,000 demand area that previously served as the starting point for the July breakout.
The daily market structure continues to be bullish, with a clear succession of lower highs and lower lows. The descending channel, combined with the failed retest of the 200-day moving average, suggests that sellers are still in full control.
The current zone around $2.7,000 is where the price last accumulated before the August rally. Losing this area completely would expose the next major decision level to $2.45,000 to $2.55,000, where long-term bids were previously intervening. On the other hand, a sustained recovery would need to begin with a $3,000 recovery and a close above the 100-day moving average to indicate a meaningful change in momentum.
4 hour chart
The 4-hour time frame emphasizes the accuracy of the downtrend. The asset continues to hold a downtrend line that starts at the $4.2,000 breakdown, and each retest of this trend line generates a new wave of selling. ETH has now reached the lower end of the descending channel while staying within the $2.7,000 demand block.
Plunging short-term liquidity has occurred on both sides of the range, indicating increased volatility and the potential for local bottoms. If buyers defend the current channel at the lows, the first upside target will be the $3,05,000 to $3,15,000 imbalance area, followed by a more important test of the $3,45,000 supply area. However, without a clear breakout above the trend line, the rebound is likely to remain corrective rather than structural.
On-chain analysis
Written by Shayan
The 2-week liquidation heatmap reveals that ETH is surrounded by a dense cluster of liquidations above the current price, especially between $3.1,000 and $3.6,000. These zones reflect the large accumulation and liquidation of short positions during the recent selloff.
Historically, once price enters a deep liquidity vacuum below a major cluster, liquidity above price becomes the next target, and the market often overshoots to the downside before making a volatile rebound.
The apparent liquidity gap is now over $3.2K, consistent with a large gap in daily fair value. These areas tend to act as magnets during rapid correction. ETH is approaching a pivotal zone as liquidity is compressed below and there is a large unfilled pocket above. Although we cannot rule out the possibility of a temporary capitulation to areas of low demand, this same move has historically preceded a strong recovery phase after exhausted sellers unwind.
