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- Ethereum is trading inside a bearish chart structure but has not confirmed a breakdown.
- On-chain data shows slower long-term accumulation and active short-term traders.
- Heavy short positioning raises the risk of a sharp upside squeeze.
Ethereum has entered January on shaky footing, slipping modestly over the past day and extending its month-long decline. While the losses remain contained, the broader setup is growing more complex. ETH is holding above key long-term support levels, yet weakening spot demand and bearish technical signals are keeping traders on edge. At the same time, derivatives positioning hints that the downside may not unfold as cleanly as charts suggest.
A Bearish Pattern Takes Shape on the Chart
On the daily timeframe, Ethereum is trading within a head-and-shoulders formation — a structure often associated with trend reversals. Momentum indicators add to the caution. RSI behavior over the past month shows weakening upside strength, signaling that buyers are struggling to regain control.
Still, the pattern is not confirmed. That requires a decisive daily close below the neckline, which has not happened yet. Until then, ETH remains in a vulnerable but unresolved technical zone.
On-Chain Data Shows Fading Conviction
On-chain metrics reveal why price action has softened. Short-term holders, often linked to speculative trading, have reduced exposure sharply over the past week. This drop coincided with ETH’s recent pullback, suggesting fast money has been exiting positions.
Meanwhile, very short-term holders have grown more active — a group known for reacting quickly to price moves. This shift increases volatility risk, as these participants tend to sell into minor weakness.
Long-term holders are still accumulating, but at a slower pace. While net buying remains positive, the reduction in accumulation weakens Ethereum’s downside buffer. In simple terms, committed buyers are still present, just less aggressive than before.
Crowded Shorts Create Rebound Risk
Derivatives markets tell a different story. Short positions now outweigh longs by a wide margin, creating a heavily one-sided trade. This imbalance matters because it raises the probability of a short squeeze if price starts moving higher.
ETH is currently hovering near a critical support zone around $3,050. A breakdown could open the door to a deeper move lower, confirming the bearish structure. On the flip side, a push above the $3,300 area would begin to unwind the pattern and pressure short sellers. A stronger rally could force rapid covering, fueling an outsized rebound.
Ethereum is caught between weakening spot demand and increasingly crowded bearish bets. The market is not breaking down yet, but it is clearly under stress. Whether ETH slides further or stages a sharp rebound will depend on which side — cautious holders or overconfident shorts — gives way first. For now, price remains the final arbiter.
Disclaimer: The information in this article is for general purposes only and does not constitute financial advice. The author’s views are personal and may not reflect the views of Chain Affairs. Before making any investment decisions, you should always conduct your own research. Chain Affairs is not responsible for any financial losses.
I’m a crypto enthusiast with a background in finance. I’m fascinated by the potential of crypto to disrupt traditional financial systems. I’m always on the lookout for new and innovative projects in the space. I believe that crypto has the potential to create a more equitable and inclusive financial system.
