Why Is Ethereum Struggling to Maintain $3,000? The Outlook for ETH's Recovery Remains Uncertain

Why Is Ethereum Struggling to Maintain $3,000? The Outlook for ETH's Recovery Remains Uncertain

Ethereum (ETH) has experienced significant price volatility, oscillating around the $3,000 mark over the past three weeks. Following a sharp decline to $2,620 on November 21, traders are increasingly concerned about a potential further drop in price if the support level at $2,800 fails to hold.

Key Takeaways:

The price of Ether has fallen below $3,000, primarily due to weak futures demand and aggressive selling by long-term holders.
A decrease in Ethereum network fees and activity indicates lower demand in the market.
Weak technical setups suggest that if the next support level is lost, ETH could drop to as low as $2,300.

Ether's price has struggled to stay above $3,000 for yet another time, due to insufficient futures demand and aggressive selling by long-term holders. The recent downturn has raised concerns about a potential drop to $2,300 if the support level at $2,800 is compromised.

ETH/USD price chart. Source: Cointelegraph/TradingView

ETH Stuck Between Two Trendlines

Ethereum's recent recovery has faced resistance from the 50-day exponential moving average (EMA), which is currently positioned at $3,260. As depicted in the daily chart below, this barrier has hindered ETH's upward movement.

Related:__Predictions for Ether prices suggest a potential rally as ETH ETF inflows resume

Despite the resistance, ETH/USD has found some support from the demand zone ranging between $2,800 and $2,600. Notably, the 200-week EMA is also located within this zone.

ETH/USD daily chart. Source: Cointelegraph/TradingView

For Ethereum to break free from this consolidation and make a meaningful recovery towards $4,000, it must first surpass the resistance level at $3,000 and the 50-day EMA. A heatmap from Glassnode illustrates significant resistance in the range of $3,100 to $3,250, where approximately 5.9 million ETH were acquired.

Ethereum: Cost basis distribution heatmap. Source: Glassnode

On the downside, a crucial support level is identified at around $2,800, where 5.8 million ETH were previously purchased.

Lack of Bullish Momentum for Ether Prices

Currently, Ether futures are trading at a 3% premium compared to the bearish ETH spot markets, reflecting diminishing demand from leveraged buyers. In these bearish conditions, futures premiums generally remain below 5%, indicating weak demand for leveraged long positions and a lack of trader optimism.

Worryingly, last week's failed recovery to $3,750 did not rekindle sustained bullish sentiment among traders.

Ether annualized futures, three-month rolling basis. Source: Glassnode

The bearish trend in Ether futures is accompanied by a notable reduction in long-term holder supply, which has dropped by 847,222 coins over the past 30 days—the most significant decrease since January 2021. This trend adds additional selling pressure that prevents ETH from remaining above the crucial $3,000 level.

Ethereum 30-day rolling LTH supply change. Source: Glassnode

A further contributor to the difficulty for Ether to maintain its price over $3,000 is the reduction in Ethereum network fees, an issue that has affected the wider cryptocurrency market as well.

Blockchains ranked by 30-day fees, USD. Source: Nansen

In the past 30 days, Ethereum’s network fees amounted to $15.1 million, which is a 45% decrease compared to the previous month. In comparison, BNB Chain saw a 56% reduction in fees, while Tron experienced a 15% drop. Although the active addresses on Ethereum's base layer increased by 3.5% during this period, there was a 14% decline in the last week alone. Furthermore, the total number of transactions fell by 11% over the same seven-day span.

Target for Ethereum Bears: $2,300

The ETH/USD pair has recently validated a bearish flag on the daily chart after dipping below its lower boundary at $3,200, as illustrated below.

“Ethereum is consolidating following a sharp sell-off, forming a bear flag beneath prior support around the $3,173 to $3,250 zone,” noted analyst Danny Naz in a post on X. He further added: “The measured target of the flag is $2,300, indicating a potential 22% drop from the current price.”

ETH/USD daily chart. Source: Cointelegraph/TradingView

Looking more closely at the 12-hour timeframe, a breach and closure below the lower trendline of a megaphone pattern sitting at $2,800 may pave the way for a more pronounced downturn, targeting a measured point of $2,376.

This scenario would reflect an 18% drop from the existing price.

ETH/USD 12-hour chart. Source: Cointelegraph/TradingView

Should this support fail and bearish momentum push the price below $2,800, the next potential support zone could be around $2,716 to $2,623.