Ethereum tests support at $1,800, as ETF flows increase. Can bulls protect it?

Ethereum’s price has fallen to the key support area near $1800 due to geopolitical unrest, persistent ETF flows, and a technical breakdown that is bearish.

Crypto.news reports that Ethereum (ETHAt the time of publication on 3 June, the price had traded at around $1.875 after briefly reaching levels above $1.800. After a recovery in April and May, the token’s gains have been erased. It is still under pressure. Sellers forced the breakdown of the psychological $2,000 level.

One of the major factors behind the current decline is the withdrawal of institutional funds. Data SoSoValue reports that U.S. Ethereum spot ETFs recorded net outflows of $845 million over the last four weeks. This is a reversal in the trend towards strong accumulation seen earlier this season.

The ongoing redemptions removed an important spot source at a moment when the market sentiment is deteriorating across all risk assets.

Elsewhere, rising tensions in the Middle East Investors have been cautious. A sharp increase in the price of crude oil has been attributed to reports that diplomatic talks between Iran and United States have stalled. This is raising inflation fears on all global markets.

The rise in energy prices has also complicated the expectations for monetary stimulus, as traders are increasingly wondering if the Federal Reserve can cut interest rates over the next few months.

Ethereum breaks down below the channel support

Ethereum’s technical structures deteriorated after the ETH price dropped out of a parallel channel descending that guided the market downward since early May.

The daily chart shows ETH breaking below the lower boundary before temporarily finding support around $1,800. This level is of particular importance because it coincides with a support area that has attracted many buyers in the past.

Ethereum’s price could fall to the lows of February near $1.750, and possibly open the way towards the $1.600 area if it fails to hold that level.

In terms of momentum indicators, we can see that the MACD for the day is below the line of its signal, and the histogram remains in the negative despite an incremental rebound off intraday bottoms. Chaikin money flow is below zero and shows that capital is continuing to exit the asset, rather than entering it.

Charts for longer-term periods show a mixed image. According According to World Of Charts’ crypto analyst, Ethereum has been testing the support of a trendline that is ascending for several years and which was in place since 2022. 

Analyst believes that by maintaining the current level, and taking back the ascending resistance above the market could open the door to a more bullish trend. But confirmation is needed before any recovery will be sustained.

Analysts at Team Lambo took a more conservative view, warning that Ethereum had entered a zone of bearish breakdown after falling below a major trendline in higher timeframes.

“In those 5 days either we will go tap the Weekly OB at 1600 or we might not break this at all. I have mentioned two important levels of 1750 and 1600 already. If they come, we expect a sharp reaction off there.”

Risks of liquidation remain high around key levels

The derivatives market suggests traders should prepare for an increase in volatility at current prices. Data from recent liquidations showed that long positions were responsible for the majority of closures forced during Ethereum’s decline below $2,000. Leveraged bulls had lost the support levels they held for most of May. This triggered a massive wave of liquidity that pushed ETH to its current level.

As the open interest and price have declined, it is clear that market leverage has disappeared. The funding rates are also lower than they were during the rally in April, indicating that bullish confidence has diminished considerably.

First, a rise above $2,000 is a sign of buyers regaining the upper hand. Above that point, former channel resistance near $2100 and descending trendline at around $2200 will be the next main resistance zone.

The focus is firmly fixed on $1800 for the time being. The bulls could target relief rallies if they hold this support.

If the price of oil falls below $1,750, $1,600 will be in view again, and this would strengthen the case for a bearish outlook heading into June’s second half.