Ether breaks below ‘Tom Lee’ trendline: Is a 10% incoming?

Key takeaways:

• Ether slipped nether $4,300 aft failing to prolong momentum supra $4,700, with $338 cardinal successful liquidations adding to the merchantability pressure.

• Analysts item $4,300 arsenic a pivotal support, but the past of September weakness raises the hazard of a 10% drawdown.

• An unfastened involvement contraction and antagonistic backing rates suggest agelong positions are being flushed, which could acceptable up a rebound if spot request returns.

Ether (ETH) failed to prolong momentum supra the $4,700 absorption this week, slipping backmost nether $4,300 portion connected Friday, wherever a captious ascending trendline support, popularized by Fundstrat’s Tom Lee, was breached.

Ether one-day chart. Source: Cointelegraph/TradingView

The determination comes amid thinning marketplace liquidity and follows a broader $338 cardinal liquidation of Ether futures positions betwixt Aug. 22 and 23, raising the probability of a deeper correction into September.

Lee and Fundstrat expert Mark Newton flagged the $4,300 level arsenic a pivotal level connected Tuesday, citing neutral comparative spot scale (RSI) readings and a still-bullish Ichimoku unreality operation arsenic reasons for optimism. 

However, the existent concern seems bleak with September seasonality casting a shadiness implicit the bullish setup. Data from CoinGlass indicates September has historically been Ether’s weakest month, with the altcoin posting its worst median returns of -12.55% during this period. That humanities bias toward drawdowns suggests near-term risks stay skewed to the downside if Ether loses cardinal enactment astatine $4,300. 

Ether's monthly returns since 2016. Source: CoinGlass

Related: ETH perchance bullish ‘for years’ arsenic megaphone signifier to $10K emerges: Analyst

Rising divergence successful Ether unfastened involvement trends

Futures positioning has besides turned cautious. According to expert Amr Taha, the regular percent alteration successful ETH unfastened involvement (OI) registered a higher debased compared to its past trough, but implicit unfastened involvement fell to a little debased connected Binance. This divergence points to structural imbalance, with retail traders closing retired agelong vulnerability alternatively than adding caller positions.

Total ETH OI contracted to astir $9 billion. Interestingly, the past clip unfastened involvement compressed to this mark, ETH rebounded sharply to $4,900, suggesting a akin clearing of excess leverage could laic the groundwork for recovery.

Ether unfastened involvement investigation by Amr Taha. Source: CryptoQuant

At the aforesaid time, backing rates crossed large exchanges flipped negative, indicating abbreviated dominance successful perpetual markets. The operation of falling unfastened involvement and antagonistic backing rates confirms that longs are being flushed, not initiated. 

However, historically, specified conditions tin besides precede crisp reversals, arsenic antagonistic backing often signals overcrowded abbreviated positioning that tin substance a faster-than-expected bullish rebound erstwhile spot request steps in.

From a method standpoint, higher clip framework charts grounds weakness heading into the monthly close. Historically, the opening of September has the highest likelihood of a correction, truthful the anticipation of a 10% dip from existent prices could instrumentality spot successful the archetypal week. 

Ether six-hour chart. Source: Cointelegraph/TradingView

The contiguous enactment to ticker is adjacent $4,180, though a decisive rebound from this level appears little apt fixed that the existent breakdown follows a prolonged bullish phase.

Instead, marketplace participants whitethorn beryllium positioning psychologically beneath the $4,000 threshold, with the $3,900–$3,700 portion aligning with a regular just worth spread (FVG) that could pull bids.

Should this portion fail, attraction would displacement toward the adjacent FVG betwixt $3,100 and $3,300. This portion could service arsenic a pivotal inflection constituent for a broader bull marketplace continuation.

A breakdown beneath would people a important displacement successful the higher clip framework operation and perchance rise questions astir the sustainability of Ether’s ongoing bull cycle.

Related: CoinShares reports 26% AUM summation to $3.46B successful Q2

This nonfiction does not incorporate concern proposal oregon recommendations. Every concern and trading determination involves risk, and readers should behaviour their ain probe erstwhile making a decision.