Is Ethereum Set for a $4,000 Breakout? Expert Identifies On-Chain Indicators for a Possible Rally

As we enter early 2026, Ethereum (ETH) is rebounding past the significant $3,000 level amid a wider cryptocurrency market upswing. However, it continues to face challenges at a crucial resistance point of $3,400. Presently, Ethereum is in a consolidation phase just below this important threshold.

Key Takeaways:

Ethereum is currently testing resistance at $3,400 amidst a market rally.
Analyst Ali Martinez indicates bullish signals, including a rise in active addresses and ETF accumulation.
Strong support levels between $2,772 and $3,109 could stabilize prices ahead.
Other analysts predict a possible price target of $5,000 based on chart patterns.
Despite recent price dips, liquidity trends suggest upward potential, especially if the $3,400 resistance is broken.

Ethereum

Technical analyst Ali Martinez suggests that if the current buying momentum continues, Ethereum might be on the verge of a rally that could bring it closer to its all-time highs.

Ethereum's Potential for a Price Breakout

In a recent post on social media platform X (formerly Twitter), Martinez highlighted on-chain indicators that reveal a bullish sentiment among Ethereum investors. Particularly noteworthy is the increase in daily active addresses on the Ethereum network, which have doubled to exceed 800,000 within two weeks.

Martinez's analysis suggests a correlation with the rising interest in Ethereum exchange-traded funds (ETFs). Since December 29, these investment vehicles have accumulated approximately 158,545 ETH, valued around $520 million, which adds a positive spin to the outlook for the altcoin.

This surge in on-chain activity has formed strong support levels for Ethereum's price, particularly between $2,772 and $3,109, which could help prevent significant drops below these critical marks.

If these support levels hold and buying pressure remains robust, a breakout above the essential $3,400 resistance could potentially lead to a significant rally toward $4,000, representing an approximate increase of 24.33% from its current trading level of around $3,217.

Ethereum
The daily chart illustrates ETH’s struggle to break past the $3,400 resistance. Source: ETHUSDT on TradingView.com

The Future Outlook for Ethereum

Other analysts, particularly from BitBull, also maintain an optimistic perspective on ETH's pricing trajectory. They have identified a potential inverse head and shoulders pattern forming on the 10-day chart, which could suggest a bullish price target of $5,000—indicating a significant 55.48% increase over last year's peak.

Despite these positive projections, Ethereum's price has dipped by 3% in the last 24 hours, according to CoinGecko data. The cryptocurrency has not yet shown the momentum needed to achieve these ambitious targets.

Another factor fostering a sense of optimism among investors is liquidity. Market expert Ted Pillows recently pointed out that following the latest price drop in Ethereum, the maximum pain point seems to favor upward movement.

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ETH’s liquidity heatmap. Source: TedPillows on X

Historically, larger investors and institutions have sought out liquidity levels, helping reset market positions and shake out numerous retail investors.

With about $3.4 billion in short positions at stake if Ethereum manages to surpass the $3,400 level in the coming days, the potential for significant price movement is certainly on the horizon.