Ethereum's Momentum Divergence and Impending Correction: A Technical and Sentiment Analysis

Ethereum’s recent price action has painted a complex picture of momentum exhaustion and correction risks, as technical indicators and sentiment metrics align to signal a potential turning point. After reaching an all-time high of $4,960 in August 2025, ETH has shown signs of weakening buyer participation, with bearish divergences in the RSI and MACD suggesting a tug-of-war between bullish fundamentals and bearish short-term dynamics [1].

Technical Divergence and Liquidity Risks

The RSI’s failure to confirm higher highs on the 4-hour and daily charts has created a classic bearish divergence pattern, indicating that buyers are losing strength despite price resilience [1]. Meanwhile, the MACD has crossed below its signal line on the 4-hour timeframe, entering negative territory and amplifying downside momentum [3]. This divergence across timeframes—bullish on the daily chart but bearish on shorter intervals—highlights Ethereum’s fragility in a market increasingly reliant on liquidity-driven ranges ($4,200–$4,900) [2].

Critical support levels at $4,400–$4,000 are now under scrutiny, as on-chain data reveals weak volume during the rally and overheating in derivatives markets [1]. A breakdown below $4,400 could trigger a cascade of liquidations, particularly during the recurring “Monday Trap” pattern, where leveraged long positions face heightened risk at the start of the week [5]. Historical backtests of MACD divergence strategies suggest that such signals can precede corrections, with a 44.15% return potential for contrarian trades in similar scenarios [1].

Sentiment and Behavioral Cues

While technical indicators point to caution, sentiment analysis adds nuance. The Crypto Fear & Greed Index has dipped to a neutral 48–51, signaling a shift from extreme optimism to measured caution [1]. This aligns with Ethereum’s overbought RSI (70.93) and weak volume, suggesting a psychological pivot point. Social media sentiment, historically predictive with 70% accuracy, also reflects mixed signals: bullish narratives around institutional adoption clash with bearish warnings about macroeconomic risks [2].

However, sentiment alone cannot override technical exhaustion. The market’s reliance on liquidity-driven ranges and the absence of strong follow-through buying after the $4,960 peak underscore the fragility of the current rally [2]. Analysts caution that a 50% correction remains a structural risk, particularly if traditional markets face broader downturns [3].

Strategic Implications for Investors

For investors, the key lies in balancing Ethereum’s long-term fundamentals (e.g., staking growth, Layer 2 innovation) with short-term correction risks. A breakout above $4,780 could reinvigorate the bullish case, but a breakdown below $4,400 would likely test support at $3,900–$4,000, with further downside potential toward $3,500 or $3,200 [5]. Position sizing and stop-loss placement near $4,400–$4,000 are critical, given the liquidity risks and liquidation cycles.

In conclusion, Ethereum’s momentum divergence and mixed sentiment metrics create a high-probability scenario for a near-term correction. While the long-term bull case remains intact, tactical caution is warranted as the market navigates this critical juncture.

Source:
[1] Ethereum's Momentum Post-ATH: A Critical Juncture for Investors [https://www.ainvest.com/news/ethereum-momentum-post-ath-critical-juncture-investors-2508/]
[2] Ethereum's 2025 Technical Renaissance: On-Chain Activity and Sentiment Fueling a Bull Run [https://www.ainvest.com/news/ethereum-2025-technical-renaissance-chain-activity-sentiment-fueling-bull-run-2508-18/]
[3] Financial Experts Warn of Possible 50% Market Crash - InvestX [https://investx.fr/en/crypto-news/crypto-experts-issue-warning-50-pct-market-crash-looming-ahead/]
[4]