After reaching a low of $2,924 on January 13, ETH has struggled to regain traction despite some encouraging metrics in the derivatives and spot markets.

Market Sentiment and Short-Term Performance

ETH experienced a sharp 20.7% weekly decline, triggering $395 million in leveraged long liquidations. Currently trading near the $3,000 psychological level, the cryptocurrency is attempting to hold its ground amid ongoing bearish sentiment.

Experts believe Ethereum could rebound from the $3,000 level. Source: Fx_Professor/TradingView

Key technical indicators reveal mixed signals. With the RSI and Stochastic Oscillator showing that ETH is oversold, the cryptocurrency could be due for a recovery. But the failure to break through resistance at $3,200 underlines that delays are characteristic of forming a consistent uptrend.

According to Coinglass data, Ethereum’s perpetual funding rate remains in neutral territory, indicating little bearish pressure on the asset despite the market turmoil of late. Open interest for ETH derivatives has jumped more than 40% since November, reflecting sidelined investors positioning for a potential rally.

Investor Behavior: Balancing Optimism and Caution

Investor activity reflects a cautious optimism. The 30-day Market Value to Realized Value MVRV ratio for Ethereum—an indicator of profitability—is now below -10%. This had many times preceded bounces in the price of ETH, so one could argue that it is due for a recovery, and indeed ETH is up 8% today.

Ethereum (ETH) price chart. Source:Ethereum Liquid Index (ELX) via Brave New Coin

In fact, more than 300,000 ETH was withdrawn from exchanges via the spot market in the last week alone—a sign of long-term confidence. “The declining exchange reserve suggests accumulation,” noted analysts at CryptoQuant, adding that investors may be preparing for an eventual market recovery.

Meanwhile, Ethereum exchange-traded funds (ETFs) saw significant outflows, with $354 million withdrawn over four days. Amberdata analysts attribute this trend to de-risking amid uncertain market conditions. However, BlackRock, a major ETF issuer, reported $124.1 million in net inflows, highlighting a divergence in institutional sentiment.

Challenges: High Fees and Layer-2 Concerns

Ethereum’s network fees remain a contentious issue. With average transaction costs hovering around $2.70, critics argue that the ecosystem struggles to compete with lower-cost alternatives like Solana and Binance Smart Chain.

Concerns about the security and decentralization of Ethereum’s layer-2 solutions further complicate its path forward. “Layer-2 networks operate independently, with their own rules and governance,” explained Hasu, a strategist at Flashbots and Lido, emphasizing that not all layer-2 transactions inherit Ethereum’s security guarantees.

Path Forward: Key Levels to Watch

Key resistance for Ethereum to take out and reclaim a bullish momentum is at $3,550, presently supported by the 50-day, 100-day, and 200-day SMAs. A strong move above this could open the way up to $3,776 for a possible retest of 2024’s high at $4,093.

Analysts believe Ethereum’s (ETH/USD) Elliott Wave is preparing for the 5th wave. Source: Mohammad_Mirdehghan/TradingView

However, a failure to sustain support at $3,000 could send ETH back to $2,817 or lower. Notably, the $2,100-$2,500 range remains a significant demand zone, supported by historical buying activity.