Ethereum Shows Signs of Recovery After 14% Pullback

Ethereum's price has been under bearish pressure for the past week, but recent indicators suggest a potential shift in momentum. The cryptocurrency has been trading within a narrow, slightly ascending range since mid-May, supported by ascending lines of support and resistance. This range has been tested multiple times, with the most recent pullback of 14% occurring after Ethereum reached a high of $2,880 and then retested support near $2,454.

The retest of support coincided with a retest of the 50% Relative Strength Index (RSI) level, which strengthened the possibility of a recovery rally within the ascending range. At the time of observation, Ethereum had already recovered slightly above $2,500, indicating a potential 15% upside before retesting the ascending resistance.

Spot flows for Ethereum have shown signs of returning demand, with the cryptocurrency experiencing its first inflows in the last 10 days. However, exchange flows have been significantly higher than outflows, indicating that demand might still be weak. Despite this, ETF flows remained positive, with about $51.6 million worth of inflows in the first half of this week, suggesting that institutions are still interested in the cryptocurrency.

Derivatives activity, which often signals investor sentiment, has shown a noteworthy uptick in the last 24 hours, consistent with the return of bullish sentiment. The Ethereum fear and greed index also jumped from 50 to 52 between Wednesday and Thursday, indicating improving market sentiment. However, market confidence remained relatively weak, and Ethereum's ability to secure a strong pull might be influenced by Bitcoin dominance, which appeared to be hitting a ceiling at the 65% level.

If Bitcoin dominance pivots in favor of the downside, Ethereum could benefit from liquidity rotation. However, market analysts have been hoping for a rate cut to reignite altcoin activity, and the latest FOMC meeting revealed that rates would remain unchanged, which may further delay altcoin season. In the short term, the price outlook indicated potential for Ethereum to rally back above $3,000 within a matter of weeks. However, geopolitical escalations could still water down market sentiment and push prices lower.