Why Ethereum May Experience a Rally Despite Recent Profit-Taking

Ethereum (ETH) has recently experienced a decline of about 4%. This drop is attributed to profit-taking by major investors, known as whales, and selling pressure from Binance. Nevertheless, Ethereum is trading near a critical price zone that might support a future price rebound. Taking liquidity between the $3,600 and $3,800 marks could enable Ethereum to aim for new highs above $4,000 and potentially reach up to $4,800.

Key Takeaways

Ethereum's decline of 4% is primarily due to profit-taking by large investors and selling pressure from Binance.
If liquidity levels between $3,600 and $3,800 are reached, Ethereum may target price levels exceeding $4,000, possibly extending to $4,800.
Despite the recent downturn, Ethereum remains in a pivotal price area that could facilitate a bullish reversal.

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Whales Cashing In on Profits

According to data from OnChain Lens, one whale made approximately $14.76 million by selling 3,000 ETH on Binance. This individual, known as the "ETH Millionaire," had previously acquired 8,009 ETH for $18.25 million around two and a half months ago. Currently, the whale retains about 2,002 tokens, which suggests confidence in further price growth.

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Additionally, Binance has been gradually moving ETH and Bitcoin (BTC) from its hot wallet. Recent transfers involved between $1.50 million and $1.80 million worth of ETH being sent to Wintermute, with the most significant single transaction valued at $6.11 million to Bitget's deposit address. Despite this selling activity, market analysis indicates that the selling pressure may shift.

The Impact of Liquidity Clusters on Ethereum

Chart analysis reveals that most of Ethereum’s liquidity is concentrated upward, particularly after clearing many long positions below $3,800. However, there remains significant liquidity between $3,600 and $3,800 that needs to be targeted to spark a price reversal. The liquidity located just above $3,600 signals that a downward movement might occur first, likely driving out weaker holders before a price rally. This could set Ethereum on a course towards higher levels, possibly exceeding $3,900, and reaching $4,800 in the short term.

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Conversely, the ever-changing nature of these liquidity clusters might keep prices fluctuating between $3,600 and $3,800 for the time being.

Balancing Fear and Greed

Currently, Ethereum’s Market-Value-to-Realized-Value (MVRV) stands at 1.5, indicating that traders are generally in profit since prices are above the realized value of $2,560. Ethereum has been trading within a range of $2,560 and $5,760. This period of stagnation suggests a balance between fear and greed in the market. Historically, such conditions often precede significant price movements, reminiscent of previous altcoin seasons.

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In summary, while Ethereum is currently experiencing a downward trend exacerbated by recent profit-taking, a potential reversal to the upside could be fueled by liquidity clusters above the prevailing price levels along with ongoing accumulation from investors.