Ethereum Poised for 30% Rally Following Double Bottom Formation, Traders Seize Buying Opportunity

Ethereum experienced a 2% decline on Wednesday, with spot traders potentially seizing the opportunity presented by the market downturn to buy the dip. The leading altcoin has displayed a double bottom pattern on the daily chart, hinting at a possible 30% upsurge.

In recent developments, Ethereum’s open interest witnessed a brief drop of nearly $1 billion to $10.42 billion following the coin’s 9% plunge on Tuesday. Open interest reflects the total number of outstanding derivative positions in an asset’s market, and a decline typically indicates traders either closing or liquidating positions, signaling increased caution among traders in Ethereum’s case.

Conversely, spot traders seem to be capitalizing on the market dip, as evidenced by the ETH exchange netflow shifting to net outflows of 65.2K ETH during the early American session. Net outflows signify dominant buying pressure, suggesting a potential correction to previous highs if the buying momentum persists.

On the ETF front, Ethereum ETFs recorded nine consecutive days of negative flows, with net outflows of $3.4 million on Tuesday. Despite the overall decline, Fidelity’s FETH and Bitwise’s ETHW saw net inflows of $3.9 million and $1.9 million, respectively. Notably, Grayscale’s ETHE experienced outflows of $9.2 million, contributing to the negative net flows. This trend has led to a total of nearly $500 million in net flows for ETH ETFs within the initial five weeks post-launch, a stark contrast to Bitcoin ETFs, which amassed over $5 billion in net inflows during a similar period.

Analysts from JP Morgan attribute the subdued demand for ETH ETFs compared to Bitcoin ETFs to factors such as the absence of staking and lower liquidity. The weaker demand for ETH ETFs has prompted asset managers to contemplate the possibility of introducing a combined ETF offering exposure to both Bitcoin and Ethereum.

In technical analysis, Ethereum is currently trading around $2,510, down over 2% for the day. The formation of a double bottom pattern on the daily chart suggests a potential bullish reversal, with a successful breakout above the $2,817 resistance level potentially leading to a 30% surge towards the $3,300 mark. However, the 100-day and 200-day Simple Moving Averages could pose as resistance levels on the way up. Failure to breach the $2,817 resistance might result in a downward movement towards the $2,320 support level.

Indicators like the Relative Strength Index (RSI) and the Stochastic Oscillator (Stoch) suggest prevailing bearish momentum, with potential signals of a bullish reversal if certain conditions are met.