Ethereum [ETH] Bulls and Bears Fight at the $3.5k Resistance Zone

Ethereum [ETH] faced rejection at the $3.5k resistance zone. The market-wide panic in recent days spurred a 38% drop to $2,125 for Ethereum

Ethereum [ETH] price dropped below $3k on 31 January, after facing strong resistance at the $3.5k level. The market-wide panic in recent days spurred a 38% drop to $2,125 for ETH before a price bounce to $2,921 occurred a few hours after the drop.

The quick drop wiped out a large amount of Open Interest (OI) as the entire market saw liquidations that could be between $8 billion to $10 billion. ETH OI was near the mid-November levels after the recent wipe out. Unfortunately for the holders, the price was considerably lower, roughly 12% down from November.

The on-chain metrics showed discouraging signals. The taker buy-sell ratio is the ratio of buyer volume to seller volume of takers (market orders as opposed to limit) in perpetual swaps. This seller dominance showed heightened fear in the market.

Additionally, this metric has been negative for the majority of the past three months. The price action has also struggled to sustain a strong uptrend, unlike Bitcoin [BTC] or some of the other large cap altcoins.

The Exchange Netflows had been positive while ETH trended higher in November. This positive netflow manifested itself during the price’s way down. Increased inflows (positive netflows) indicate heightened potential for selling pressure.

Over the past couple of days, the 7-day Moving Average (MA) fell into negative territory, showing slight outflows and some signs of accumulation.

The dormant circulation saw a strong spike during the retest of the $3.5k resistance on the 31st of January. This was also when the U.S. markets, especially tech stocks, saw large losses.

The Funding Rate was also negative in recent days. Meanwhile, the Mean Coin Age (2 year) has plateaued over the past two weeks after trending upward since late December. This was similar to what occurred in September.

Therefore, the short to medium term sentiment was strongly bearish. The price action underlined the importance of the $3.5k resistance zone.

Yet, the Mean Coin Age and the slight negative outflows were modest indications of bullish hope.