Ethereum retakes 10% market share, but ETH bulls shouldn't celebrate yet

Ethereum’s recent surge, exceeding 50% in May, has pushed its market dominance towards 10%, a level unseen since March. This rapid growth, however, presents a double-edged sword. While some analysts anticipate further gains, reaching $3,500–$3,800, indicators suggest a potential short-term correction.

Ethereum’s daily relative strength index (RSI) has reached overbought levels not seen since May 2021. Historically, such extreme RSI readings on ETH.D have preceded significant pullbacks. One notable example was in early July 2024, where a similar RSI peak led to a more than 17.5% drop in ETH.D over the following 315 days. The current situation mirrors this pattern, suggesting a potential local top in market share. Further adding to the bearish outlook, ETH.D remains below its 200-day exponential moving average (EMA), a resistance level that has repeatedly capped previous recovery attempts. A decline towards the 50-day EMA, around 8.24%, is possible, indicating potential capital outflow from Ethereum to other cryptocurrencies.

Technical analysis of the ETH/USD four-hour chart reveals a bearish divergence. While price continues to make higher highs, momentum indicators are trending lower. This “three clear drives of divergence,” as noted by crypto trader AlphaBTC, often precedes trend exhaustion. Fibonacci levels suggest potential support zones around $2,330 or $2,190, representing a 10–15% drop from current prices. This potential pullback, however, is viewed by some analysts, such as Michaël van de Poppe, as a “buy-the-dip” opportunity before a renewed climb to above $3,500. Veteran trader Peter Brandt even predicts a “moon shot” to over $3,800.

In summary, while Ethereum’s recent performance has been impressive, overbought RSI levels and bearish divergence on the ETH/USD chart suggest a potential short-term correction. However, the long-term outlook remains positive for some analysts, who anticipate significant price increases following a pullback. It’s crucial to remember that all investment decisions carry risk, and individual research is essential before making any trading choices.