Ethereum’s Bull Run at Risk? U.S. Demand Slump Sparks Bull Trap Fears

Ethereum's rally hits turbulence as U.S. investors tap the brakes—classic bull trap setup or temporary pullback?

Warning signs flash

Network activity slows as American wallets tighten, leaving ETH bulls questioning whether this is the real deal or just another 'buy the rumor, sell the news' circus. Meanwhile, institutional players keep stacking—because nothing says conviction like hedging your bets with OTC derivatives.

The closer: If history repeats, retail will panic-sell the dip while whales accumulate. Again.

Coinbase Premium Index Signals U.S. Buyer Retreat

A major red flag comes from the Coinbase Premium Index, which tracks the price difference of Ethereum on Coinbase versus other global exchanges. When this index is positive, it typically signals strong demand from U.S.-based institutional investors. But this week, the index fell to -0.01, its lowest point since May.

To put this into context, earlier this month, on July 10, the premium briefly turned negative to -0.0023, and the market hardly reacted. This time, however, the deeper negative value is a sign that U.S. institutional investors are backing off, despite recent Optimism around Ethereum-based exchange-traded funds (ETFs).

This drop suggests a cooling in U.S. demand, which is significant because institutional flows from the U.S. are typically a key driver in major crypto rallies. Without that support, Ethereum’s price increase may not be sustainable.

CMF and OBV Show Diverging Momentum

Two key technical indicators—the Chaikin Money FLOW (CMF) and On-Balance Volume (OBV)—are offering mixed messages that point to fading momentum.

The CMF, which measures the strength of money flowing into and out of the asset, has been making lower highs even as Ethereum’s price continued to rise. This divergence is often a bearish signal, indicating that despite the price going up, less capital is actually entering the market.

At the same time, the OBV, which tracks cumulative trading volume, has been rising steadily, following the uptrend in price. While this could be interpreted as sustained investor interest, some analysts argue it may be misleading retail traders, giving the illusion of strong momentum when institutional demand is actually fading.

The combination of falling CMF and rising OBV can create the conditions for a bull trap—a scenario where volume appears healthy, but underlying buying power is drying up.

Chart Patterns Suggest a Fragile Uptrend

From a technical analysis perspective, Ethereum’s price is currently forming a pattern known as an ascending wedge, a structure often considered bearish. This pattern suggests that upward momentum is slowing, and the price could break down rather than up.

Ethereum briefly broke out above the upper boundary of this wedge, hitting around $3,858. This MOVE likely triggered FOMO (fear of missing out) buying. But shortly afterward, the price corrected back down, falling below $3,510, reinforcing concerns of a false breakout.

These kinds of “fake-out” breakouts are classic features of bull traps. They create the impression of a breakout to attract buyers, only to reverse quickly and trap them in unfavorable positions.

For Ethereum to invalidate this bearish setup, it must break and hold above $4,024, a major psychological and technical resistance. If it fails, a retest of the $3,510 support level is likely.

Is This Just a Temporary Pause or a Trend Reversal?

While Ethereum’s long-term outlook remains strong due to its wide use in DeFi, NFTs, and smart contracts, the short-term price action is looking fragile. The signs are clear:

• U.S. institutional demand is weakening, according to the Coinbase Premium Index.

• Money flow is drying up, as shown by the CMF.

• The rising OBV might be masking the actual strength of the rally.

• The ascending wedge pattern and failed breakout suggest a loss of momentum.

Unless Ethereum can break through the $4,000 resistance with conviction and volume, there’s a real risk the market is headed for a correction.

Conclusion: Investors Should Be Cautious

Ethereum’s recent price movement might appear bullish on the surface, but a deeper look reveals structural weakness. With U.S. institutions stepping back and on-chain indicators turning bearish, traders and investors should exercise caution.

A rally built on weak foundations is prone to sudden reversals. Whether Ethereum is pausing before a true breakout or heading into a bull trap remains to be seen. But for now, staying alert and watching key support and resistance levels is critical.