Ethereum prices have entered a tense phase following a weak start to January. ETH has dropped about 1% over the past 24 hours, and the decline over the past 30 days has widened to approximately 3.6%. Meanwhile, the price remains significantly above long-term key support, leading to divided opinions among traders.
What makes this situation complicated is the presence of risk balance. Although Ethereum is moving within a bearish chart pattern, position data suggests that downside potential is not as straightforward as it may appear.
Is Ethereum moving within a downtrend pattern?
On the daily chart, Ethereum is forming a head and shoulders (head and shoulders) pattern. This bearish structure involves price moving through a left shoulder, a higher peak (head), and a lower right shoulder. The downtrend is confirmed once the neckline is broken.
For Ethereum, a daily close below the neckline requires approximately a 9% decline. Conversely, a rise of about 12% would invalidate the pattern itself.
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Momentum indicators are also not favoring the bulls. RSI (Relative Strength Index) measures price momentum. When the price makes lower highs while RSI makes higher highs, it indicates a hidden bearish divergence, signaling a weakening trend. This exact phenomenon occurred from early December last year to early January this year.
Subsequently, the price declined further, and no bullish divergence has appeared. This means the downside risk has not been resolved.
In other words, structurally, Ethereum remains in a fragile state. However, chart structure alone cannot explain everything. The next question is: where is the selling pressure coming from?
Short-term selling increases, weakening support due to holder behavior.
On-chain (blockchain-based) data provides clues to distinguish between those selling and those not selling.
First, HODL Waves. This indicator categorizes Ethereum's supply by holding period. Short-term holdings represent speculative capital, while long-term holdings reflect more confident investors.
From January 6 to 9, the cohort holding for 1 week to 1 month saw a sharp drop in supply share from 7.44% to 3.92%, a 47% decrease, which is one of the reasons for Ethereum's weak price performance.
At the same time, the cohort holding for 1 to 7 days saw their share increase from 1.34% to 2.21%, a 65% rise. This group is highly sensitive and tends to sell at the slightest price movement, making it worth monitoring.
Long-term support is also weakening. The Hodler Net Position Change indicator shows whether long-term holders are increasing or decreasing their assets. Although the figure remains positive, the decline in buying pressure is evident. Net inflows decreased from approximately 179,000 ETH on January 4 to about 135,500 ETH on January 9, and the cumulative pace has dropped by 24%.
In simple terms, long-term holders are still buying, but their stance is no longer as aggressive as before. This has weakened the downside support.
As spot market support weakens, attention shifts toward derivatives (futures and options), which are more likely to influence short-term direction.
Price convergence in Ethereum increases the risk of a rebound in derivative supply and demand.
Derivative data shows a strong imbalance.
In major perpetual markets, cumulative short liquidation exposure has reached approximately $3.8 billion, while long exposure stands at around $1.57 billion. Short positions exceed longs by about 115%. In percentage terms, the market heavily anticipates a downward move.
This is important because if shorts become excessively accumulated, a price rise could trigger automatic buying demand from short covering, potentially leading to a 'short squeeze'.
This risk is concentrated around key price levels. Ethereum is currently trading near $3,080. The crucial support level to watch recently is $3,050, a level repeatedly recognized as highly significant.
Below that is $2,890. If the daily close breaks below $2,809, the 9% decline scenario becomes realistic, confirming the neckline breakout and bearish pattern.
On the other hand, $3,300 is the first level that could break the bearish structure. Breaking above this zone on a daily chart would begin to negate the right shoulder pattern. If the price rises all the way to $3,440, the pattern would be completely invalidated, and all short positions from the past 7 days would likely be liquidated—a scenario consistent with a 12% rebound.
Currently, Ethereum is facing rising short positions while the underlying spot support is weakening.
Ethereum's price is not yet clearly declining, but it is not in a safe zone either. Selling pressure is increasing, long-term buying has dropped by nearly a quarter, and short-term holders remain active. Meanwhile, the derivative market still holds potential for a sharp rebound.
The next decisive move will be determined by the price itself. Whether Ethereum drops 9% or rises 12% depends on which level fails to hold first.
