The ETH price continued to fall last week after falling below an important psychological level. But be careful with short sellers, as this downward move may be a necessary condition to create the conditions for a bullish rebound. Hence, the new week offers the exciting promise that the trend could change in favor of the bulls.

ETH price is recovering

ETH has fallen 22% since Jan 1st, breaking the 200-day Simple Moving Average (SMA) at $ 3,437, and hitting a swing low at $ 2,927. This move exhausted selling pressure and marked a temporary low.

Since then, price has risen above the weekly support at $ 3,061 and is currently consolidating around that level. Market participants can expect increased buying pressure, causing ETH to move the 200-day SMA to a support floor and revisit the 2-day supply zone, which extends from USD 3,675 to USD 3,862.

Overall, this rally will generate a 22% return on ETH from the current position. That said, price is unlikely to break the aforementioned supply zone and cross the weekly resistance barrier at $ 4,068, where the 50-day SMA is currently falling below the 100-day SMA, forming a death cross. This step will bring the overall increase to 30%.

ETH / USDT 1-day chart | Source: TradingView

The short-term bullish outlook is represented by Santiment’s 365-day Market-to-True Value (MVRV) model. This on-chain metric is used to determine the average profit / loss of investors who bought ETH in the last year.

The indicator is currently at -15.2%, which shows that owners are losing money and are less likely to add to selling pressures. More interestingly, the data shows that this is an opportunity zone where long-term buyers are clustering.

This could signal that ETH is ready to move up quickly.

MVRV ETH 365 days chart | Source: Santiment

Another IntoTheBlock Global In / Out of the Money (GIOM) indicator shows that ETH price will not encounter resistance on its way to $ 3,600, suggesting that ETH could rise slightly higher to return to that level testing.

Roughly 5.12 million addresses who bought 20.29 million ETH tokens at an average price of 3,697 US dollars are now at a loss. Hence, any short term rally around this barrier is likely to be hampered.

GIOM ETH | Source: Santiment

While the ETH price is likely to rise, market participants should keep an eye on the network growth indicator. This on-chain metric is used to determine user interest and interaction with the project.

Network growth currently hovers at 87,300 after falling from 193,640 on October 28, 2021. This decrease of 55% reflects the disinterest of investors in ETH at the current level.

Growth of the ETH network | Source: Santiment

The estimated leverage ratio is also a factor that supports the short-term bullish outlook, but warns investors to be cautious. The index is hovering around an all-time high of 0.158, suggesting that many investors are taking high risks that could lead to catastrophic crashes if it went wrong.

Estimated ETH Leverage | Source: CryptoQuant

If ETH fails to bounce off the weekly support at USD 3,061, it is likely that the price can return to the next hurdle at USD 2,712, then to amass the sell-stop liquidity below. If ETH closes below USD 2,636 on a daily basis, it will hit a lower low, completely invalidating the bullish thesis. This move could open the door to the next collapse and push the price down to retest the $ 2,440 level.

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