Ethereum is recovering slightly after a massive drop that took the price below $4,000. The broader market remains cautious as traders reassess their positions following recent volatility, which could lead to a reversal of the bullish trend.

Technical Analysis

By Shayan

The Daily Chart

On the daily timeframe, ETH recently broke below the midline of its ascending channel, the 100-day moving average, and touched the 0.5 Fibonacci retracement level near $3,400-$3,500. This zone coincides with the previous structure support, triggering a bounce toward $3,800.

However, the RSI is still below 40, showing weak momentum. A daily close back above $4,000 could mark a short-term recovery, but failure to reclaim the channel would likely send ETH below the $3,000 range, which would mean the end of the bull market.

The 4-Hour Chart

The 4-hour chart reveals that Ethereum found temporary support within the $3,400 demand zone after a sharp decline. The RSI also dipped into the oversold area, and is now near 24, suggesting a potential short-term reversal.

Still, resistance at $3,800 remains critical. A rejection there could lead to another retest of $3,400, while a clean breakout may open the path toward $4,200 again.

Onchain Analysis

Funding Rates

Funding rates across exchanges have plunged into negative territory, the lowest since late 2024, as traders rushed to unwind long positions. This reset indicates fear and liquidation pressure, but could also hint at a potential bottom if the bearish sentiment continues while the price stabilizes. Historically, negative funding rates during deep pullbacks have preceded short-term recoveries once selling momentum fades.

Therefore, while the market could be in the early stages of a bearish reversal, there is still hope that this move could just be a flush out to cool off the futures market and pave the way for a spot-driven, sustainable rally.

Ethereum and Solana dominated investor interest, while altcoins like Sui and Chainlink also saw minor inflows.

Bitcoin attracted record-breaking inflows of $3.55 billion last week, even as its price neared historic highs and investors avoided short products. Across the broader digital asset market, investment inflows totaled $5.95 billion, which is the largest weekly inflows ever recorded.

CoinShares believes this surge indicates a delayed reaction to the FOMC’s interest rate reduction, coupled with disappointing employment figures from the ADP Payroll report and uncertainty surrounding US government stability due to the shutdown. The resulting price rally lifted total assets under management (AuM) in digital assets to a whopping $254 billion.

Investment Influx

According to the latest edition of the ‘Digital Asset Fund Flows Weekly Report,’ the bullish trend was widespread as Ethereum recorded $1.48 billion in inflows last week, bringing its year-to-date total to a record $13.7 billion, nearly triple last year’s figure. Solana also hit a new weekly record with $706.5 million in inflows, which pushed its YTD total to $2.58 billion. XRP attracted $219.4 million, while most other altcoins saw minimal investor activity.

Investment products dedicated to Sui, Chainlink, and Litecoin welcomed inflows of $3.4 million, $1.5 million, and $1.2 million in inflows respectively. Meanwhile, Cardano also saw a modest inflow of $0.5 million during the same period. Multi-asset products, on the other hand, was the only cohort to have bucked the trend as it saw a weekly outflow of $23.5 million.

Last week’s inflows showed broad regional optimism, with the United States leading the sentiment as it saw $5.0 billion inflows last week, a new weekly record. Switzerland also set a weekly high, posting $563 million in inflows, while Germany welcomed its second-largest weekly inflows of $312 million.

Next up were Canada, Australia, and Hong Kong with $32.1 million, $6.3 million, and $5 million in inflows, respectively. Brazil, too, settled with a minor $4.8 million in inflows. Sweden, in contrast, acted as an outlier with $8.6 million in outflows.

October Seasonality and Market Narratives

Going forward, QCP Capital predicted a strong but cautious outlook for Bitcoin as the market approaches a potential October breakout. According to its latest note, major whales appear to have either completed their asset rotations or are holding steady, and waiting for momentum to unfold.

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Leveraged traders continue to chase the rally as BTC-PERP funding rates on major exchanges remain elevated, with 35% on Deribit and 29% on Hyperliquid, which points to aggressive positioning. However, such high perpetuals carry the risk of sharp liquidations, as seen two weeks ago when nearly $3 billion in long positions were wiped out, creating institutional entry opportunities.

In the options market, traders short on end-October calls have rolled strikes higher to 126k-128k as spot rallied. While some may view the recent BTC surge as excessive without clear catalysts, supportive narratives remain strong. For one, Bitcoin’s safe-haven appeal is reasserting itself amid the US government shutdown and outperforming gold, while October’s historically bullish seasonality adds fuel.

To top that, centralized exchange balances have fallen to six-year lows, yet another bullish indicator.