Is Ethereum Signaling a Bullish Reversal After the Recent 40% Drop?

TLDR:

• Ethereum’s RSI prints higher lows while price shows lower lows, forming classic bullish divergence.
• Whales accumulated 220,000 ETH worth $660 million in the past week despite earlier sell-off activity.
• Spot Ethereum ETFs recorded $84 million inflow on December 22, signaling institutional interest return.
• Breaking above $3,100 resistance could trigger rally toward $5,000 target and previous all-time highs.

Ethereum faces a critical juncture after plunging 40% since August, with current prices hovering around $2,900. 

Technical analysts identify emerging bullish signals that could mark the end of the downtrend. Market participants debate whether recent patterns and institutional activity confirm a genuine reversal or represent a temporary bounce.

Are Technical Indicators Confirming a Trend Reversal?

A bullish divergence pattern appears on Ethereum’s daily chart, raising questions about potential upside momentum. 

The Relative Strength Index shows higher lows while price action prints lower lows. This divergence often precedes significant rallies when historical patterns hold true.

Altcoin Buzz points out that the last similar setup resulted in a 27% price surge. The analysis suggests ETH could target $3,100 as the next resistance level. 

Breaking through this barrier might revive discussions about the $5,000 price objective that dominated earlier market cycles.

Technical analyst JAVONMARKS identifies a Hidden Bull Divergence comparable to the 2023 formation. 

The setup suggests Ethereum could challenge its all-time high near $4,954 if conditions align. A move beyond that level potentially opens the door to $8,500, though such projections depend on sustained momentum and market conditions.

Does Institutional Activity Support the Reversal Thesis?

Spot Ethereum ETFs attracted $84 million in inflows on December 22, marking a potential shift in sentiment. 

This contrasts with previous weeks when institutional products experienced steady outflows. James Easton draws parallels to earlier buying patterns that preceded ETH’s rally from $1,300 to $4,950.

Large wallet holders accumulated 220,000 ETH worth approximately $660 million over the past week. Ali Charts reports this buying spree follows a $360 million sell-off the week prior. 

The reversal in whale behavior raises questions about whether smart money anticipates higher prices or simply takes advantage of discounted levels.

The convergence of institutional inflows and whale accumulation presents a compelling case for bulls. However, skeptics note that short-term buying activity does not guarantee sustained upward momentum. 

The market now watches whether Ethereum can reclaim the $3,100 resistance level to validate these early reversal signals.

Price action at current levels reflects ongoing uncertainty between bears defending lower prices and bulls attempting to establish support. 

Technical patterns and accumulation data favor a potential reversal scenario. Yet confirmation requires Ethereum to break key resistance zones and maintain momentum above critical thresholds in coming sessions.