Ethereum Price Crashes 33% Over Weekend — Is $2,100 Bounce Signaling ETH Reversal?

Key Takeaways

• ETH dropped 40%, reaching $2,100.
• Grayscale’s ETHE outflows are easing, indicating selling pressure could end soon.
• MACD is still showing bearish momentum.

Ethereum (ETH) kicked off a rocky journey on July 22 after peaking at $3,555. What began as a gradual decline transformed into a rapid descent by Aug. 2, sending the premier altcoin into a steep plunge.

ETH plummeted 40% in just two days, reaching a low of $2,100. Still, despite the recent drop, ETH is showing signs of a potential bullish reversal, with indicators suggesting significant overselling by retail traders.

Why Did ETH Crash?

Ethereum ETFs began trading on July 23. Grayscale’s ETHE experienced more than $2 billion in outflows. This caused significant selling pressure, which is now easing. Grayscale, which offers two Ethereum spot ETFs (ETHE and Mini Trust), saw higher ETHE sales due to its higher fees than competitors. 

Arkham Intelligence  reported an 80% decrease in ETHE outflows this week, indicating the selling could end soon. ETHE has recorded $2.12 billion in outflows since launch, while other funds have reported $1.60 billion in inflows. BlackRock’s ETHA led with a $700 million net inflow, followed by Fidelity and Bitwise.

ETH Price Analysis  

On May 27, Ethereum reached a high of $3,977, slightly lower than its March 11 peak of $4,092. After this peak, ETH fell to the $2,820 support level on July 5. If a five-wave impulse forms from the July 5 low and breaks above $3,500, it would confirm the end of the corrective stage from March.

However, with the recent price rejection, the rise from July 5 appears to be a three-wave ABC pattern. This could potentially extend the corrective WXYXZ pattern, indicating two additional waves.

In this scenario, ETH is likely to drop to at least $2,800, given that the July 22 high was much lower than the May 27 high.

Having broken the $2,800 horizontal support, charts show no major support until $2,100. The daily chart RSI is now in the extreme oversold zone at 18%, yet there are no signs of a reversal.

MACD still signals strong bearish momentum, suggesting that further downside support should be monitored. However, if ETH is finishing its Z wave from the WXYXZ pattern, it should soon start consolidating before any signs of a reversal can emerge.

Zooming into the hourly chart, we see a bearish pennant forming. These formations usually lead to more downside, but larger wicks on the hourly candles hint that buyers are slowly stepping in. 

If the price breaks below this triangle, we can anticipate a lower target of $1,900. Conversely, a breakout to the upside could be the first signal of the upcoming consolidation before ETH starts to recover.