Ethereum Drops 11.5% Amid Investor Accumulation

Ethereum (ETH) has undergone a notable price correction over the past week, with its value declining from $2,738 to $2,426, marking an 11.5% decrease within just five days. This sharp drop has raised concerns among investors about whether this is a temporary adjustment or the start of a more significant downward trend.

Despite the price decline, there are indications of accumulation taking place. On May 16, there were substantial withdrawals of ETH from exchanges, suggesting that investors are moving their holdings to private wallets for long-term storage. This behavior is typically seen as a bullish sign, as it indicates that investors are confident in the long-term prospects of the cryptocurrency.

Additionally, the Coinbase Premium Index, which measures the price difference between Coinbase and other exchanges, has remained positive over the past month. This metric suggests growing interest from U.S.-based investors, a trend that has been consistent since ETH began its rally from $1,600. However, despite this positive premium, ETH faced rejection at the $2,800 level, indicating strong resistance at this price point.

On the other hand, the 7-day moving average of the taker buy-sell ratio has been falling rapidly over the past week. This metric shows that taker sell orders are vastly outweighing buy orders in the market, suggesting increased selling pressure as some holders appear eager to take profits. This pattern is reminiscent of market conditions observed in December 2024, which preceded a sharp drop in price.

Trading volume has also been declining consistently over recent days. The spot volume bubble map shows low trading activity during April’s bottom, with green bubbles indicating a drop in volume. This contrasts with December 2024, when a sharp uptick in trading volume was marked as “overheating” before Ethereum faced a steep decline. The cooling trading volume as ETH approaches the $2,600-$2,800 resistance zone may indicate buyer wariness. Alternatively, it could suggest that selling pressure from profit-takers has not been overwhelming, supporting the idea of a market reset rather than a complete trend reversal.

Technical analysis identifies a bearish trend line with resistance at $2,540 on the hourly chart. If Ethereum manages to break above the $2,550 resistance level, it could potentially move toward $2,580. A clear break above this point might open the path to the $2,700 zone or even $2,780 in the near term. On the downside, if Ethereum fails to clear the $2,500 resistance, it may face further decline. Initial support is near $2,400, with major support at $2,350. Should the price drop below this level, it could test support at $2,320 or potentially fall to $2,220.

The most recent market data shows Ethereum has stabilized above the 61.8% Fibonacci retracement level of the upward move from $2,308 to $2,509, suggesting some support at current levels. This stabilization could indicate that the recent price correction is a temporary adjustment rather than the start of a more significant downward trend. However, investors should remain cautious and monitor the market closely for any further developments.