The price of Ethereum has experienced a significant decline, falling below the previous support level of $1,600. This downward movement has taken the price to levels last seen in March. However, there has been a recent rebound, with Ethereum trading at new weekly lows of $1,540 before attempting to regain ground above $1,600.
Interestingly, there has been an increase in the movement of previously dormant Ethereum tokens from old wallets. This coincided with the sell-off on Monday. The Age Consumed on-chain metric by Santiment indicates that there has been a noticeable rise in the most dormant Ethereum tokens over the past three months. This decrease in the average age of tokens, coupled with falling prices, is seen as a sign of capitulation, which often precedes reversals.
The rollback to March price levels could attract more long traders who aim to profit from short-term gains as the price of Ethereum rebounds and closes the gap towards $2,000. This renewed interest in Ethereum suggests that fresh momentum is building for the next rally, targeting levels above $1,600, then $1,800, and eventually $2,000.
However, it is important to note that a sustained break above $2,000 would signal the start of a much-anticipated bull market, potentially occurring in 2024 or 2025. Until then, the current bullish outlook should not be solely relied upon unless Ethereum’s price surpasses the lower ascending trendline or closes above the pivotal $1,600 level.
Maintaining support at $1,600 could help alleviate potential selling pressure that may arise following the confirmation of a death cross pattern. This bearish chart formation occurs when a short-term moving average, such as the 50-day EMA, crosses below a long-term one, like the 200-day EMA. The presence of a death cross reinforces the bearish outlook, indicating that sellers have the upper hand and the ongoing downtrend is likely to continue.
If investors fail to overcome their fear of uncertainty and rally behind Ethereum, the Money Flow Index (MFI) may drop into the oversold region, validating another sell-off towards $1,450.
Matrixport analysts have expressed concerns about the performance of altcoins, including Ethereum. They believe that if Ethereum breaks below the psychologically important $1,600 level, it could lead to further price declines, especially if revenue growth disappoints. The longer the price remains below $1,600, the higher the chances of another sell-off and investor capitulation. Matrixport even suggests that a drop to $1,000 cannot be ruled out, as it aligns with revenue projections from the Ethereum ecosystem.