Ethereum Price Forecast: RSI Flashes Major Multi-Year “Buy Signal” for ETH

Ethereum (ETH) is recovering today, but losses piled up during the weekend as the market tanked after President Donald Trump named his pick for Chairman of the Federal Reserve.

ETH dropped from $2,700 to as low as $2,178 during the Asian session today as the market sold the news after Kevin Warsh emerged as the elected candidate to replace Jerome Powell once his term ends in May.

Following this strong drop, ETH has recovered by 1.3% in the past 24 hours to $2,350, as buyers seem to have shown up after the top altcoin hit $2,200.

Trading Volumes Explode to 20% of ETH’s Market Cap

Trading volumes have spiked to 20% of the token’s circulating market cap at $55 billion – a dramatically high number that showcases the strength of this wave of selling.

One is used to seeing those numbers on low-cap altcoins and meme coins, but not on market leaders like ETH. This was a major liquidation event that took out hundreds of thousands of positions out of the futures market, and that has caused a $5 billion wipe-out in just 5 days.

Ethereum (ETH) Daily Liquidations – Source: CoinGlass

What’s more surprising is that Ethereum’s daily liquidations on January 30 ($1 billion in long positions) were the second highest on record, only surpassed by the October 10 flash crash.

The market has been deleveraging since that major technical event and has failed to regain its confidence since then.

The Fear and Greed Index confirms how skeptical investors are about the crypto market as a whole right now, as this sentiment gauge has hit 15 (Extreme Fear) four times already in the past 12 months alone.

These are huge numbers that the market has not seen in years, and that could break something along the way – especially considering that Ethereum is the home of hundreds of DeFi protocols that use its native asset as collateral.

ETH Bounces Off Key Support From Which ETH Rallied to a New ATH

The daily chart shows that ETH had already sent a sell signal on January 20, after the token hit a key resistance at $3,400. As we emphasized multiple times back then, this was a key structural area of resistance that the token needed to overcome to reverse its downtrend.

ETH/USD Daily Chart (Binance) – Source: TradingView

However, sellers won the hand and pushed ETH back to $2,800. Then they managed to push through this support, triggering the cascade of liquidations we saw recently.

Now, ETH is bouncing off a key support dating back to June. The last time, the token rallied its way to a new all-time high. Is buying interest strong enough to pull a similar stunt this time?

It wasn’t back then, and sentiment was as bad as it is right now. So, it would not be crazy to envision a strong recovery from these lows.

RSI Prints Lowest “Oversold” Signal Since August 2024

ETH/USD Daily RSI – Source: TradingView

Although it is too early to call a “bottom”, the Relative Strength Index (RSI) just hit oversold in this high time frame, which is a strong signal that the downtrend could be overextended.

In fact these are the lowest daily RSI readings we have got since August 2024. Back then, ETH spent a while at $2,150 and then rallied to $4,000 just a few months after. With this context, this might not be such a bad time to buy for the long run based on historical patterns.