Ethereum has been on a downward trend for nearly six weeks, falling below the $4,000 mark on Dec. 16, 2024.
Ethereum has been on a downward trend for nearly six weeks, falling below the $4,000 mark on Dec. 16, 2024. Since then, it has dropped more than 20%, trading at $3,260. Analysts say Ethereum needs stronger blockchain activity, new use cases, and increased adoption to regain investor confidence and reclaim its previous highs.
Ethereum is facing resistance at $3,400, a key level that, if broken, could trigger the liquidation of more than $1.09 billion in leveraged short positions, according to data from CoinGlass. Crypto trader Cas Abbé noted in a Feb. 1 post on X that Ethereum is forming a bullish divergence on the daily chart and that a daily close above $3,400 could set the stage for a rally toward $4,000.
A research report from Bybit and Block Scholes on Jan. 31 highlighted that the trading volume of Ethereum options has surged to its highest level in over a month. The increase in trading volume suggests that some investors are positioning for a potential price rebound. Analysts noted that call options, which bet on Ethereum’s price rising, have seen a bullish shift across different expirations. However, they cautioned that an increase in options activity alone is unlikely to drive up Ethereum’s price without broader market support.
Aurélie Barthere, principal research analyst at Nansen, said Ethereum must increase its fundamental blockchain activity to remain competitive. Other layer-1 networks are catching up in terms of applications, transaction fees, and staking activity. Barthere also pointed out that Ethereum could benefit from stronger collaboration with private companies and government entities, especially in the U.S., where regulatory conditions for blockchain are improving.
Reports suggest that the Elon Musk-led Department of Government Efficiency (DOGE), a non-governmental agency focused on cost-saving initiatives, has explored blockchain-based expense tracking and financial management. There have been rumors that DOGE representatives have met with public blockchain developers to discuss potential applications.
Ethereum could also see increased adoption through potential ventures linked to the Trump family. Joseph Lubin, co-founder of Ethereum and founder of Consensys, suggested that the Trump family may be considering an Ethereum-based cryptocurrency business, which could contribute to Ethereum’s growth.
Some industry analysts believe institutional buying through Trump’s World Liberty Financial protocol could help Ethereum regain strength in February. However, they stress that sustained price recovery depends on real-world adoption and higher on-chain activity.
Ethereum’s options skew, which measures the difference in implied volatility between call and put options, has shifted in favor of bullish positions. While this indicates growing optimism among traders, analysts remain cautious, stating that Ethereum needs stronger market fundamentals to break through key resistance levels and regain its previous highs.
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