Ethereum price forecast: $4k rebound looms as traders defend $13B contracts

Insights

Ethereum (ETH) price is hovering above $3,340 mark on Sunday, March 24, down 20% from the 2024 peak of $4,092 recorded on March 12. Vital market trends suggest that Ethereum is setting up for volatile price action in the week ahead.

Will the bulls seize the momentum to stage a $4,000 rebound or will ETH prices finally dip below $3,000?

Ethereum Open Interest holds firm despite 20% price dip

Ethereum price has been stuck in a downward spiral since the sell-the-news frenzy that heralded the successful Dencun upgrade deployment on March 13.

Between March 13 and March 24, ETH price has dropped 20%, triggering widespread liquidations in the derivatives markets.

Over the past two weeks, ETH has struggled to attract new demand, but curiously, market data shows that existing investors are showing significant resilience.

The chart below compares Ethereum Open Interest, the total capital stock currently invested, to the Trading Volume, which measures the level of activity and overall market demand for the asset.

At the recent market top on March 12, Ethereum Open Interest peaked at $13.67 million. After two weeks of bearish price action, open interest has only dropped by 7% to hit $12.6 billion at the time of writing on March 24.

In clear terms, while ETH price has dropped by 20% since March 12 peak, Open Interest has only declined by 7%.

When price declines faster than open interest, strategic investors could consider is bullish for two key reasons.

Firstly, a relatively smaller drop in open interest suggests that investors are maintaining their positions rather than exiting the market entirely.

This resilience in open interest indicates that a significant portion of investors remains committed to Ethereum, potentially viewing the price decline as a temporary setback rather than a long-term trend reversal.

Also, it suggests that while some traders may be selling their positions, others are entering new positions or increasing their exposure to Ethereum.

This renewed buying interest amidst price weakness may indicate a potential reversal of the downward trend.

As investors now perceive the lower ETH prices as attractive buying opportunities to enter new positions, this could set ETH price for some volatile price action in the week ahead.

ETH price forecast: $4,000 Rebound Ahead?

As investors now perceive the lower ETH prices as attractive buying opportunities to enter new positions, this could set Ethereum price for a possible volatile price upswing toward $4,000 in the week ahead.

In confirmation of this bullish stance, IntoTheBlock’s In/Out of the Money indicator shows that ETH is unlikely to fall below $3,300 in the short-term.

The chart below shows a cluster of 2.14 million existing holders had bought 1.32 million ETH at the average price of $3,300. Having spent over $3.5 billion to acquire those holdings, that support cluster could be daunting for the fatigued bears.

And if the market momentum swings bullish as predicted, Ethereum price could hit $3,700 area before facing significant resistance. At that area, 648,530 holders that bought 3.84 million ETH at the average price of $3,630 could mount a major sell-wall.

But if the bullish traders keep holding their positions and new entrant keep trooping in, Ethereum price could advance toward $4,000 as predicted.