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The price of Ethereum has fallen sharply this year after facing significant resistance at the $4,000 level in December.
Ethereum (Ethereum) is down roughly 20% from its December high, coinciding with an ongoing sell-off in Bitcoin and other altcoins.
The contraction was partly attributed to outflows from Ethereum exchange-traded funds. On Wednesday, these funds saw net outflows of $159 million, after $86 million the previous day. However, despite the recent outflows, Ethereum ETFs have attracted a net inflow of $2.5 billion since their approval in 2024.
ETH’s decline also coincided with a rise in exchange balances. According to CoinGlass, the number of ETH held on exchanges rose to 15.85 million on January 9, up from 15.3 million on December 30. An increase in exchange balances often indicates that investors are liquidating their holdings.
From a macroeconomic perspective, Ethereum has been impacted by rising US bond yields amid a hawkish stance from the Federal Reserve. The 30-year bond yield rose to 4.96%, its highest level since October 2023. Short- and medium-term bond yields also continued to rise.
Rising yields indicate that the market expects the Fed to maintain its hawkish approach due to persistent inflation concerns.
Ethereum price analysis
The weekly chart shows that ETH faced significant resistance at the $4,000 level, which it has struggled to clear since March of last year.
Despite the recent pullback, the cryptocurrency remains above its 50-week and 100-week moving averages, suggesting that the bulls still maintain some control.
Notably, Ethereum is gradually forming an inverse head and shoulders pattern, which is a widely recognized bullish reversal signal. The “head” is at $2,155, while it forms the “left shoulder” at $2,825. As long as ETH remains above the shoulders at $2,825, the bullish outlook remains intact.
A confirmed breakout will occur if ETH moves above the neckline at $4,085. If this happens, the next levels to watch are the all-time high at $4,865 and the psychological milestone of $5,000. However, a drop below the right shoulder at $2,825 would invalidate the bullish view.
