Ethereum faces a crucial week: Why it could fall after hitting $3.700

Ethereum faces bearish signals and risks of a correction. We analyze the key factors that could determine its course in the coming days.

The price of Ethereum (ETH) experienced a notable rally this week, reaching $3.710 on August 4, driven by institutional inflows and continued strategic accumulation by large holders. However, the euphoria was short-lived, as the cryptocurrency's price fell back to $3.500 hours after the rally, in line with analysts' warnings that a correction would follow this rally.

In July, ETH surged more than 60%, rising from $2.400 to nearly $3.900, raising expectations of a breakout toward $4.000. But technical resistance and selling pressure began to weigh, marking a turning point for the cryptocurrency's price. 

Resistance and Supply: The Ceiling Ethereum Can't Break

The area between $3.700 and $3.800 has established itself as a difficult barrier for the price of ETH to overcome. Technically, this range is a resistance zone because the number of those who want to sell outnumbers those who want to buy. In other words, many investors take advantage of the opportunity to sell just as Ethereum approaches this level, creating pressure to hold its value back.

Added to this pressure is the fact that there is more of 460.000 ETH waiting to be removed from staking, a volume not seen for four years. This means that, in the coming days, a significant amount of ETH tokens could enter the market, further increasing supply and selling pressure just as Ethereum is already struggling to break through this technical ceiling. The situation is complicated by the fact that the Ethereum Foundation has sold more than 25.000 ETH in recent months, adding a psychological factor, considering that, if even those behind the project begin to reduce their exposure, traders and other investors tend to become more cautious.

On the other hand, experts observe Ethereum's price behavior on a shorter time frame, such as the 4-hour chart, detecting clear signs that the uptrend is losing steam. Until recently, Ethereum displayed a sequence of rising highs and lows, but after reaching $3.700, this dynamic began to change. Furthermore, the price drop to approximately $3.500 broke the last major low, indicating a structural shift: the market is no longer in a clear uptrend.

Experts point out that these types of signals don't guarantee a sharp decline, but they do warn of the possibility of corrections or downward movements in the short term. Given this, more experienced traders tend to be more cautious, adjusting their strategies and waiting for confirmation before taking risks.

Furthermore, buying volume has declined, while selling has intensified. At the end of July, for example, Ethereum accumulated over $230 million in net sell orders, supporting the idea that the market could be entering a distribution phase, with large players selling their positions.

For those trading on short-term timeframes, this is very important. If Ethereum fails to reclaim the $3.700 level, the next strong support lies around $3.356. Breaking below that level could accelerate the decline and confirm a short-term bearish scenario for the cryptocurrency.

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Bull trap underway?

One of the most discussed scenarios by technical analysts is the possibility of a "bull trap" in Ethereum. This phenomenon occurs when the price rises rapidly, attracting retail investors who expect a continuation of the rally, but then reverses sharply, generating liquidations and losses.

In the case of ETH, the $3.880 level has been identified as a high-liquidity zone. Many pending orders are concentrated there, which could attract the price in a final push before a drop. If Ethereum rises to that point and then reverses sharply, it would confirm the hypothesis that the bullish movement was designed to capture liquidity before turning around.

Beyond the charts, the macroeconomic context adds further complexity to the crypto market. Uncertainty over Federal Reserve interest rates and weak labor data are leading many investors to reduce exposure to risky assets. Thus, although Ethereum spot ETFs have shown stability, as is the case with BlackRock's fund, which has not seen any recent outflows, the market remains sensitive to any changes in the institutional and regulatory narrative.

Finally, the fear and greed index remains at neutral zone, reflecting a clear lack of conviction among market investors.

Conclusions: What can investors expect?

Ethereum is in a critical zone. If it manages to stay above $3.500 and break above $3.700 with increasing volume, it could resume its path towards $3.900 or even $4.000. However, if selling pressure persists and support gives way, the price could fall back to $3.200 or lower. Market analyst Ali Martinez notes that the next two key support levels for Ethereum would be $2.924 and $2.750. 

For short-term investors, the outlook calls for caution. Bearish signals, technical resistance, and a potential bull trap suggest that the risk of a correction remains. In this context, monitoring volume, support levels, and macro news will be key to making informed decisions.