Ethereum Price Back to Major Support Level: But Can It Hold?

Summary:

The Ethereum price has reversed sharply lower after failing to break above the $2,900 resistance. Now at $2,400, the recovery could be in doubt.

The Ethereum price has reversed sharply lower after failing to break above the $2,900 resistance. Now at $2,400, the recovery could be in doubt.

Ethereum has followed Bitcoin lower overnight after running into selling above $2,900. Just as BTCUSD has been unable to reclaim $40,000, the same can be said with ETHUSD and the $3,000 level.

The second largest crypto asset Ethereum had outperformed the market leader by a big margin over the first 5 months of the year.

Bitcoin is considered a store of value (SoV) due to its finite supply. However outside of that its utility offers very little.

Ethereum is seen as much more. The network provides the foundations for developers to build new projects across multiple industries. The rise of Decentralised Finance (Defi) has been a boost to the Ethereum price in 2021.

ETHUSD started the year trading at $750. By mid-April, it had increased by over +500% to $4,380.

Outperformance on the way up inevitably led to the same on the way down.

ETHUSD Price Action

Ethereum declined -60% its April record, trading to a low of $1,720 last week.

Since then, ETHUSD has recovered, making several attempts to break higher. Each try has fallen short, around $2,900.

The recent failure has resulted in the Ethereum price dropping -20% to this morning’s low of $2,328 before stabilizing around $2,400.

Technical Outlook

The daily chart shows us two important areas. Above the market we can see a band of resistance between $2,900 and $3,000.

Support is between $2,380 and 2,500. Therefore, at $2,400, the price is at a perilous level.

This morning’s dip pierced the lower end of the support channel. However, the price soon found its way back into the band. This reinforces the validity of the support.

If Ethereum consolidates within this range, recovery is possible. The obvious target would be the $2,900-3,000 area.

Suppose the Ethereum price is unable to hold this support. It would increase the chance of a steeper decline, opening the door to $2,200 and potentially $1,750.

For the moment, the range is holding. Bulls may find value buying around the current price. Longs could then place a stop below today’s $2,330 low.

This is a nice way to take a small amount of risk with a potentially large payout if the $2,900 target is met.