Ethereum [ETH] has reached an important milestone, crossing the $4,000 mark just a few hours ago. However, the price is already showing signs of retreating instead of holding steady.
With buying activity slowing down, there’s speculation that a correction could be on the cards this week.
Ethereum Hits $4,000 with Strong Whale Activity
Ethereum’s rise to $4,000 didn’t come out of nowhere. Over the past week, the cryptocurrency saw a sharp increase in activity, particularly from whales. These are investors or institutions making high-value transactions, often exceeding $100,000.
According to on-chain data, Ethereum’s weekly transaction volume soared by over 300%, peaking at $17 billion on 6 December before dropping back to around $7 billion.
This surge in whale activity appears to have been a key driver behind Ethereum’s rally. Data shows that these large transactions aligned closely with the price movement, suggesting whales were positioning themselves strategically.
However, as soon as ETH crossed the $4,000 milestone, many of these larger players started taking profits, contributing to the price pullback we’re seeing now.
Another factor to consider is exchange netflows. Significant outflows have been recorded where traders move ETH off exchanges and into cold storage.
While this is usually a bullish signal, as it indicates reduced selling pressure, the price has still struggled to maintain its position above $4,000. This hints at hesitation in the market, as traders weigh their next moves in light of reduced buying momentum.
Is Ethereum Due for a Correction?
Despite the excitement around Ethereum’s recent rally, there are signs that the market might be heading for a correction. One of the key indicators to watch is the price-Daily Active Addresses (DAA) divergence.
This measures how price movements align with user activity on the network. Unfortunately, Ethereum’s DAA divergence has dropped sharply, sitting at -64.17%, according to Santiment.
This indicates a notable decline in user engagement, which could weaken the foundation for any sustained price gains.
In addition, Ethereum’s Coins Holding Time, a metric that tracks how long holders keep their ETH before selling, has been declining since 6 December.
This drop suggests more investors are offloading their holdings, likely taking advantage of the recent rally. If this trend continues, it could put more downward pressure on the price.
From a technical perspective, the $3,800 level is shaping up to be a key support area. If Ethereum falls below this, analysts believe the price could drop further to around $3,600.
The reduced buying activity we’re seeing doesn’t help the situation, as it indicates traders are becoming more cautious about entering at higher levels.
The short-term outlook remains uncertain. Ethereum’s performance over the next few days will largely depend on whether it can hold above critical support levels or if selling pressure intensifies, pushing the price lower.
Conclusion
Ethereum’s climb to $4,000 marks a significant achievement, but it’s clear the market isn’t fully confident about maintaining these levels just yet.
With signs of reduced buying interest and increasing selling pressure, a correction this week seems increasingly likely. If the price breaks below $3,800, further declines to $3,600 could follow, adding to the bearish sentiment in the short term.
That said, Ethereum’s long-term prospects remain intact. Its role in decentralised finance (DeFi) and the broader blockchain ecosystem continues to make it a key player in the market.
However, for now, traders should approach with caution, keeping a close eye on support levels and market sentiment in the days ahead. The next move could set the tone for Ethereum’s performance as the year comes to a close.
