Ethereum Bulls Might Fail Because of This Critical Reversal

Ethereum's price recently broke out of a bullish triangle pattern, suggesting renewed upside momentum. However, that breakout now appears vulnerable. ETH has printed a bearish divergence for nearly three weeks, raising concerns that the move lacks conviction. Such divergence often precedes a trend reversal.

Ethereum has shown a clear bearish divergence over the past three weeks, signaling weakening internal strength. While the ETH price continued forming higher highs, the Chaikin Money Flow indicator posted higher lows. This pattern suggests price appreciation occurred alongside rising capital outflows rather than sustained inflows.

Such divergence often precedes a trend reversal. Investors appear to be distributing ETH into strength instead of accumulating. As capital exits the market during price expansion, upside momentum erodes. This dynamic increases the probability of a failed breakout, especially in a cautious broader crypto environment.

Why Did This Happen?

Ethereum's bearish divergence indicates that price gains are not supported by strong buying activity. The market has seen increasing distribution from large holders. Whale wallets holding between 100,000 and 1 million ETH sold more than 230,000 ETH in the past week.

This selling pressure equals roughly $760 million at current prices. Large wallet outflows align with the declining CMF, confirming reduced confidence among major holders. When whales sell into breakouts, price sustainability weakens.

The Ethereum price currently trades near $3,309 at the time of writing. It holds just above the $3,287 support level. The recent triangle breakout projected a 29.5% upside move, targeting $4,240. However, fading momentum and bearish divergence threaten to invalidate that bullish structure.

How Did Markets React?

Ethereum ETF inflows have surged recently, with some ETFs recording substantial net inflows. BlackRock's Ethereum ETF recorded a daily flow of US$149.2 million on January 16, 2026. This inflow indicates growing institutional confidence in Ethereum.

Ethereum's network activity remains strong, with active addresses reaching a 28-month high. Daily transaction counts have hit record levels. This data suggests continued network adoption and usage, despite bearish price action.

Ethereum's price action is influenced by both fundamental and technical factors. The recent price move reflects a combination of ETF inflows, whale selling, and technical indicators. The market is now closely watching key support levels and on-chain metrics.

What Are Analysts Watching Next?

Analysts are closely monitoring Ethereum's price behavior near critical support and resistance levels. The $3,287 support level is crucial. A breakdown below this level would send the price toward $3,131, confirming the move as a fakeout.

Ethereum's on-chain data provides additional insights. Staking activity has reached new highs, with approximately 36 million ETH locked in staking contracts. This represents close to 30% of the circulating supply.

Regulatory developments could also influence Ethereum's price action. The U.S. CLARITY Act is expected to provide a clearer regulatory framework for digital assets. Passage of this act could unlock the next phase of decentralized finance and support Ethereum's long-term prospects.

The broader market environment remains cautious. Bitcoin and Ethereum have seen mixed performance, with Bitcoin showing strong inflows while Ethereum faces distribution pressure. This divergence suggests that market participants are carefully assessing risk and reward.

Investors are also watching for signs of renewed institutional buying. While some ETFs show strong inflows, others have experienced outflows. This mixed activity highlights the complexity of the current market environment.

The Ethereum price could face further volatility as market participants assess the balance between bullish and bearish forces. Technical indicators, on-chain metrics, and regulatory developments will all play a role in shaping the next price move.