Key Points:
ETH liquidity swept around $4200 before rebounding to near $4500.
Spot demand drove the rally, while futures participation remained sluggish.
A daily close above $4500 is crucial to confirm the breakout momentum.
Ethereum (ETH) rose 3.5% on Wednesday, approaching $4500, after briefly breaking through the $4200 liquidity earlier on Monday. This movement aligns with a bullish divergence between price and the relative strength index (RSI) on the four-hour chart, while also breaking out of a descending wedge pattern that lasted for two weeks. Both technical patterns typically indicate that a potential upward trend will continue.
To confirm the breakout, ETH needs to ensure a daily close above $4500, a level that could open the path to an external liquidity area between $4800 and $5000.
Market commentator Jelle also acknowledged this breakout, noting that "price discovery is waiting for" this altcoin.
However, one analyst believes the breakout is not yet decisive. Cryptocurrency trader Popeye pointed out that ETH remains within a broader range. In a post on X, the trader stated:
ETH futures data shows a divergence in spot and derivative liquidity. The open interest in Ethereum futures has not significantly increased during this rally, indicating limited participation from leveraged traders. In contrast, aggregated spot trading volume has risen with prices, while the funding rate remains close to neutral, consistent with its 30-day average.
This combination suggests that the current movement is primarily driven by spot demand rather than futures leverage. Spot-driven rallies typically indicate organic buying interest, but without futures participation, the breakout may lack durability once momentum wanes.
Binance recorded over $16 billion in spot altcoin trading volume on Monday, far exceeding the activity of competing exchanges. This was attributed to improved macro liquidity conditions and Binance-specific incentives.
This growth contributed to a broader market recovery, with Bitcoin (BTC) breaking through $112,000 within two days. However, the flow of funds for ETH tells a different story. Data from CryptoQuant shows that the net absorption of ETH on Binance remained essentially negative on Wednesday, continuing the trend from August, despite the overall enthusiasm for altcoins, indicating persistent selling pressure.
This divergence suggests that while traders are rotating into higher beta altcoins, ETH may not be the primary beneficiary of speculative fund flows for the time being.
Therefore, the key technical level for ETH remains at $4500. If the daily close is above this level, it may confirm the breakout momentum and continue the rally; if it fails to hold this risk, it will reaffirm the range-bound structure, with targets potentially located below the range low of $4100.
Related: Ethereum (ETH) staking queue hits a two-year high, institutions continue to accumulate.
This article does not contain any investment advice or recommendations. Any investment and trading activities involve risks, and readers should conduct their own research before making decisions.
Original article: “Is Ethereum's breakout real or a mirage? Traders debate whether Ether (ETH) can hold the $4500 mark”
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