Is Ethereum Poised for One Final Correction Before Reclaiming Its 2021 ATH? – August 5 Analysis
- Ethereum's Price Shows Resilience With 3.2% Daily Gain
- Why the $3,900 Resistance Keeps Rejecting Ethereum
- The Critical $3,500 Support Holding ETH's Fate
- What Would It Take for Ethereum to Reach New All-Time Highs?
- Historical Patterns Suggest Potential for Final Correction
- Ethereum's Technical Indicators Paint Mixed Picture
- Institutional Accumulation: The Silent Bullish Factor
- Ethereum vs. Bitcoin: The Ratio to Watch
- Final Thoughts: Patience May Be Key
- Ethereum Price Action: Frequently Asked Questions
Ethereum's price action has traders on edge as ETH faces a critical juncture. After being rejected at the $3,900 resistance level, the second-largest cryptocurrency shows mixed signals - bouncing firmly off $3,500 support while technical indicators suggest potential for both breakout and correction. This analysis dives deep into ETH's current market structure, historical patterns, and the key levels that could determine whether we'll see a final pullback before challenging the all-time high.
Ethereum's Price Shows Resilience With 3.2% Daily Gain
Despite Bitcoin's recent 9% pullback from its peak near $120,000 (yes, you read that right - BTC has been making moves!), ethereum has demonstrated relative strength with a 3.2% gain over the past 24 hours. The ETH/BTC pair tells an interesting story - while down 0.05% on the hourly chart, it's up nearly 3% daily, suggesting altcoins might be waking up from their slumber.
The weekly performance paints a more nuanced picture:
| Pair | 1H | 24H | 7D | 1M | 3M | 6M |
|---|---|---|---|---|---|---|
| ETH/BTC | -0.05% | 2.89% | -1.65% | 37.48% | 68.36% | 11.08% |
| ETH/USDT | -0.07% | 3.19% | -4.80% | 46.22% | 99.45% | 29.16% |
Source: Coincheckup
What's fascinating is how ETH has nearly doubled against USD in three months while showing more modest gains against BTC. This divergence suggests that while Ethereum has been performing well in absolute terms, Bitcoin's recent surge has somewhat overshadowed ETH's progress.
Why the $3,900 Resistance Keeps Rejecting Ethereum
In April, ETH was trading at significantly lower levels before buyers staged an impressive comeback to test the $3,900 barrier. This level has become the crypto equivalent of that one bouncer who never lets you into the club - it's rejected price advances multiple times now.
The weekly chart shows this resistance isn't just some random number - it's where several technical factors converge:
- The 0.786 Fibonacci retracement level from the 2021 high to 2022 low
- A historical volume node where large sell orders tend to cluster
- The upper boundary of a multi-year descending channel
Each rejection at this level increases the likelihood of a pullback toward support at $3,500 or even $2,900 if things get ugly. But here's the interesting part - the RSI on weekly charts has been making higher lows since last year, suggesting underlying strength that might eventually overcome this resistance.
The Critical $3,500 Support Holding ETH's Fate
After the latest rejection at $3,900, Ethereum found immediate buyers at $3,500 - a level that's now been tested three times in the past month. In trading terms, this is what we call a "make or break" situation.
The daily chart reveals why this support matters:
- It aligns with the 50-day moving average (a key trend indicator)
- Represents the 0.382 Fib level of the recent rally
- Coincides with a high-volume node where buyers have consistently stepped in
From my experience watching these markets, when a level gets tested this many times in quick succession, it usually breaks. The question is whether ETH will bounce first to retest $3,900 or if we'll see a breakdown toward $2,900 first.
What Would It Take for Ethereum to Reach New All-Time Highs?
Let's be real - everyone's waiting for ETH to smash through its November 2021 peak around $4,800. But the road there isn't straightforward. Here's what needs to happen:
- Clear $3,900 resistance: This is the immediate hurdle. A weekly close above this level would open the path to $4,200.
- Hold above $3,500: Maintaining this support keeps the bullish structure intact.
- BTC stability: Ethereum still dances to Bitcoin's tune during major moves. BTC holding $117,000 would help.
- Network activity: The upcoming Ethereum upgrades need to maintain developer interest and user adoption.
The wildcard? Institutional interest. We're seeing more TradFi players quietly accumulating ETH, which could provide the fuel needed for a true breakout.
Historical Patterns Suggest Potential for Final Correction
Looking back at Ethereum's previous cycles reveals an interesting pattern - the asset tends to undergo one last significant correction before embarking on its final parabolic MOVE to new highs. In 2020, ETH corrected 30% in September before its massive rally began.
The current setup shows similarities:
- Strong recovery from bear market lows ✓
- Multiple tests of a major resistance level ✓
- RSI showing bullish divergence on higher timeframes ✓
- Decreasing volume on recent highs (potential warning sign) ✓
This doesn't guarantee a repeat, but traders should be aware of the possibility. A drop to $2,900 WOULD represent about a 25% correction from recent highs - painful but not unusual in crypto terms.
Ethereum's Technical Indicators Paint Mixed Picture
The technical toolbox shows conflicting signals:
- Weekly MACD remains above zero (bullish territory)
- RSI making higher lows while price makes lower highs (positive divergence)
- 200-day moving average sloping upward
- Daily RSI rejected at 60 (failed to enter strong bullish zone)
- Declining volume on up moves
- Futures funding rates turning negative (speculators betting against price)
This mixed bag suggests we might be in for more consolidation before the next big move. Personally, I'd watch for either a clear breakout above $3,900 with strong volume or a flush down to $3,200-$3,000 that shakes out weak hands before the next leg up.
Institutional Accumulation: The Silent Bullish Factor
While retail traders obsess over short-term price action, institutional players have been steadily accumulating ETH. The Grayscale Ethereum Trust (ETHE) premium has narrowed significantly, suggesting smarter money is finding the current prices attractive.
More telling is the growth in ETH held on centralized exchanges - down nearly 30% year-to-date as institutions and long-term holders move coins to cold storage. This supply shock could set the stage for explosive moves when demand returns.
Ethereum vs. Bitcoin: The Ratio to Watch
The ETH/BTC ratio often acts as a canary in the coal mine for altcoin seasons. After underperforming BTC for much of the year, the ratio shows tentative signs of bottoming:
- Held support at 0.05 BTC/ETH
- RSI showing bullish divergence on weekly chart
- Potential inverse head and shoulders pattern forming
A breakout above 0.06 BTC/ETH could signal the start of altcoin season proper, with Ethereum leading the charge. But until then, bitcoin remains the market's pacesetter.
Final Thoughts: Patience May Be Key
Ethereum stands at a crossroads - bullish fundamentals and institutional interest contrast with technical resistance and overheated short-term indicators. The most likely path forward might involve one last shakeout below $3,500 to liquidate overleveraged longs before a sustained push toward all-time highs.
Traders should watch these key levels:
- Upside breakout: $3,900 (confirmed with volume)
- Bullish invalidation: $3,200 (would suggest deeper correction)
- Bearish breakdown: $2,900 (opens risk to $2,400)
This article does not constitute investment advice. As always in crypto, position sizing and risk management remain crucial in these volatile conditions.
Ethereum Price Action: Frequently Asked Questions
Why does Ethereum keep getting rejected at $3,900?
The $3,900 level represents a confluence of technical resistance factors including Fibonacci retracement levels, historical price memory from previous market cycles, and current options positioning where many traders have placed their strike prices. It's also a psychological round number that tends to attract profit-taking.
How likely is Ethereum to drop to $2,900?
While possible, a drop to $2,900 would require breaking through several support levels first. The $3,500 zone has held strong multiple times, and the $3,200 level represents the 0.5 Fibonacci retracement of the recent rally. Market sentiment would need to turn significantly more bearish for such a move to occur.
What would trigger Ethereum to break its all-time high?
Several factors could propel ETH past its $4,800 ATH: 1) Spot Ethereum ETF approvals bringing institutional flows, 2) Successful implementation of upcoming protocol upgrades improving scalability, 3) Renewed DeFi activity driving network usage, and 4) General crypto market bullishness continuing with Bitcoin leading the way.
Is now a good time to buy Ethereum?
Market timing is extremely difficult. Dollar-cost averaging (DCA) remains a sound strategy for long-term investors. For traders, waiting for either a confirmed breakout above $3,900 or a deeper correction to stronger support levels might offer better risk/reward opportunities.
How does Bitcoin's price affect Ethereum?
Bitcoin remains the market leader, with Ethereum and other altcoins typically following its general direction. When BTC is stable or rising, altcoins tend to perform well. During Bitcoin corrections or periods of high volatility, altcoins often underperform as traders flee to the relative safety of BTC.
