ETH rebound trap? Hidden 20% downside risk above $3,114, with a critical support line in jeopardy

Ethereum has experienced a rebound after a short-term correction, with a 0.48% increase over the past 24 hours and still maintaining a positive monthly return. However, whether this rebound can sustain remains a key question. Quick analysis indicates that the current upward movement appears more like a technical adjustment rather than a trend reversal. Prices are still trapped within a bearish pattern, and once the critical support levels are broken, there could be approximately 20% downside risk.

Is the Rebound a False Signal or a True Reversal? Technical Patterns Reveal the Truth

From the daily chart perspective, Ethereum remains in a head and shoulders top pattern. The high point formed on January 6 is considered the right shoulder area. The current rebound seems more like a technical retracement within the pattern rather than a sign of trend reversal. This distinction is crucial because it directly influences the future price trajectory.

Critical Price Levels and Life-or-Death Moments

In technical analysis, the most dangerous position is often near the neckline. Ethereum’s key risk zone is centered around $2880, which is exactly the neckline of the head and shoulders pattern. If the daily chart effectively breaks below this level, technical estimates suggest there could be about 20% downside potential. Based on the current price of $3114, this implies a possible drop toward around $2490.

Contradictory Signals from On-Chain Data

The situation here is quite complex. On one hand, the short-term holder NUPL indicator remains in profit-taking territory, indicating that further upward price movement could trigger some profit realization. On the other hand, the proportion of 1-week to 1-month short-term holders has sharply decreased from 11.5% in mid-December last year to about 3.9%, suggesting that short-term selling pressure is easing.

The Money Flow Index (MFI) shows signs of bullish divergence, indicating that during the correction, there has been sustained accumulation on dips rather than panic selling. Meanwhile, the proportion of medium-term holders (6-12 months) is steadily rising, reflecting a more defensive allocation behavior. In simple terms, the market has both profit-taking positions waiting to be realized and long-term funds accumulating on dips, showing clear divergence.

Market Context Adds Caution

Santiment analysts point out that Ethereum’s social media sentiment is subdued, similar to levels before the 2025 price surge. This comparison is interesting because that period ultimately pushed Ethereum back to its all-time high in 2021. However, low sentiment itself is neutral and needs to be interpreted alongside other signals.

Additionally, whale movements are worth monitoring. According to the latest news, Vitalik-related addresses recharged 330 ETH into Paxos 11 hours ago, worth approximately $1.02 million. This is the second such recharge since January 2025. Paxos is a well-known settlement platform, and this move is often interpreted as a potential signal of profit-taking. Moreover, the market faces pressure from ETF fund outflows.

Three Key Scenarios for Future Trends

If Ethereum can sustain above $3300 and break through $3440, the bearish structure could be completely invalidated — this is the most optimistic scenario. The intermediate scenario involves prices oscillating within the $3090-$3110 range, an area rich in historical cost basis, where market divergence often occurs.

The most pessimistic scenario is that prices fail to hold effectively above $3090-$3110, potentially falling back to test $2970 and approaching the critical support at $2880. Once this support is broken, a rapid decline becomes a high-probability event.

Summary

Ethereum’s current rebound is more a game of patience and structural observation. The technical pattern of a head and shoulders top remains unbroken, and the rebound may just be an internal adjustment within the pattern. On-chain data shows signs of accumulation on dips, but profit-taking pressure persists, and market divergence is evident. Low social sentiment combined with whale profit-taking signals adds caution. The key levels — especially $3090-$3110 and $2880 — will directly determine the trend’s direction. At this stage, cautious observation is preferable to active trading.