Ethereum price is slowly forming a rare pattern: is a surge coming?

Ethereum’s price has fallen sharply this year after encountering significant resistance at $4,000 in December.

Ethereum (ETH) is down nearly 20% from its December high, coinciding with an ongoing sell-off in Bitcoin and other altcoins.

The decline was partly attributed to outflows from funds traded on the Ethereum spot exchange. On Wednesday, a net outflow of $159 million was seen from these funds, following $86 million the previous day. But despite recent outflows, Ethereum ETFs have attracted net inflows of $2.5 billion since their approval in 2024.

ETH’s decline also coincided with an increase in foreign exchange balances. According to CoinGlass, the number of ETH held on exchanges increased from 15.3 million on December 30 to 15.85 million on January 9. An increase in foreign exchange balances generally indicates that investors are liquidating their assets.

Ethereum balances on exchanges | Source: Coinglass

From a macroeconomic perspective, ETH has been impacted by rising US bond yields amid the Federal Reserve’s hawkish stance. The 30-year bond yield rose to its highest level since October 2023 at 4.96%. Short- and medium-term bond yields also continued to rise.

Rising yields suggest the market expects the Fed to maintain its hawkish approach due to inflation concerns.

Ethereum price analysis ETH price chart | Source: crypto.news

The weekly chart shows that ETH is facing significant resistance at the $4,000 level, which it has been trying to surpass since March of last year.

Despite the recent pullback, the cryptocurrency remains above the 50-week and 100-week moving averages, indicating that the bulls still retain some control.

Most importantly, Ethereum is slowly forming an inverse head and shoulders pattern; This is a widely recognized bullish signal. The “head” is at $2,155 and the “left shoulder” is at $2,825. The bullish outlook will remain intact as long as ETH remains above $2,825.

A confirmed breakout could occur if ETH breaks above $4,085. In such a case, the next levels to watch will be the all-time high of $4,865 and the psychological turning point of $5,000. However, a break below the right shoulder below $2,825 will invalidate the bullish view.