Ethereum Price Prediction: ETH Drops Below $4K – Is the Rally Over?

The market has corrected course this week and Ethereum (ETH) has faced a strong downturn as the price just dropped below the $4,000 psychological threshold.

After experiencing some strong selling pressure at $4,950, ETH has booked a 12.5% loss in the past 7 days and currently sits at $3,960.

Trading volumes have jumped by 60% as this key support has been broken, and market forces may have pulled a long squeeze.

In the past 24 hours, $660 million worth of crypto long positions have been wiped out of the market, and Ethereum is currently accounting for nearly 40% of that total as it retreats by 7% during this period.

Ethereum Total Liquidations (6 Months) – Source: CoinGlass

This is still a small number compared to the $1.6 billion worth of crypto long positions that were flushed out just two days ago. However, these two big liquidations could raise eyebrows among bulls and trigger a cascade event, as nobody wants to be the last to get out of a bull market.

ETH Hits Key Support and Risks a 15% Drop

We have been tracking ETH’s price action relative to two key trend line supports lately. In our latest price prediction, we emphasized that the $3,900 level would be critical to determine if the rally will continue.

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

If the price bounces off this mark, it is highly likely that we will get a strong leg up toward $5,000 in the near term.

The Relative Strength Index (RSI) in the daily chart is approaching oversold territory, meaning that the downturn could start to lose steam if buyers step in to scoop up ETH at this much lower price.

Grabbing ETH at $4,000 offers a 20% upside potential in the near term if we do get a strong comeback to $5K.

Meanwhile, a drop below the $3,900 mark means a bearish trend line breakout that could risk a much more dramatic drop to $3,400 at least. This means a 15% downside risk. The risk-to-reward ratio of this trade is appealing at the time, especially if investors get their hands on ETH below $3,900.

Trading volumes have spiked and have exceeded the 14-day moving average by nearly three times, underscoring the strength of the selling pressure.

A move below $3.9K could mark the end of this latest leg up, but with so many catalysts favoring a bullish outlook for cryptos, it is highly unlikely that this will be the highest that ETH, and altcoins for that matter, will go during this cycle.

Market Conditions Still Favor a Bullish Outlook

Despite the drop, market conditions continue to favor a bullish outlook for cryptocurrencies after the Federal Reserve cut rates for the first time this year. Meanwhile, altcoin season was just getting started as BNB Coin (BNB) surged to $1,000 while ETH made a new all-time high.

It seems highly unlikely that ETH has hit a cycle top already. Ethereum spot ETF inflows show that investors have not panicked despite the latest downturn, as they have only withdrawn $296 million out of these products this week.

This shows long-term commitment from investors, especially at a point when ETH is dropping below such a key marker.

Lookonchain Official X Account – Source: X.com

Interestingly, whale activity shows a similar level of commitment. Lookonchain spotted some big moves out of exchanges involving $1.2 billion worth of ETH being moved to external wallets.

This is typically considered a bullish signal as it means that whales are not selling any time soon.