Ethereum Recovery Strengthens Despite Weak On-Chain Activity
After holding its recent lows, Ethereum has seen a remarkable recovery as buyers gradually gather strength again. Even though there is still a lot of resistance at higher time frames, things are looking up at lower time frames, and after months of reduced network involvement, on-chain activity appears to be stabilising. Even if ETH has been recovering as of late, the daily chart shows that it is still part of a wider bearish framework. The asset is still trading within the falling channel that has been dragging the market lower for a few months. The downward slope of the 100-day and 200-day moving averages, relative to the present price, further supports the idea that the trend is bearish. A strong influx of buyers into the market followed a sharp decline towards the $1.5K demand zone, triggering a relief recovery that got close to the notable resistance level near $1.8K. Given its alignment with the upper trendline of the descending channel, this location is of great importance as it serves as a significant confluence resistance.
Now that it’s back above the midline, the RSI has strengthened the positive momentum that had been building since it had entered oversold area. Nevertheless, there is still opportunity for further upside if resistance is broken, as the indicator has not yet reached overbought levels. The supply zone between $2.0K and $2.2K, where support was previously, might be revealed with a definitive daily close over the $1.8K barrier. On the flip side, if the present region is rejected, attention will most likely be directed to the $1.5K support level. If it were to cross that line, it would increase the chances of a following fall toward far lower goals. A more positive picture emerges when looking at the 4-hour span. Buyers appear to have temporarily reclaimed control of the Ethereum market as the price has formed a clear higher low after breaking out of the current consolidation area over $1.5k. Thus far, confirmation of the highlighted higher low around the $1.75K level has occurred, suggesting that the market structure is improving. Efforts to recover have been impeded in recent weeks due to the price approaching the $1.8K to $1.85K barrier zone.
The relative strength index has returned to its previous highs after a brief cooling spell, indicating that momentum has also increased. There is ongoing buying pressure, although short-term consolidation could be on the horizon due to the barrier above. The short-term bullish structure will be intact so long as ETH keeps its position above the $1.7K higher-low level. A convincing breach above $1.85K would strengthen the case for a push toward $2.K to $2.2K supply zone. However, the recent recovery framework would be undermined and focus would shift to the $1.64K order block and, maybe, the $1.5K crucial rebound zone, if the higher low cannot be sustained. The Active Addresses indicator for Ethereum has been steadily declining since reaching a high point earlier this year. The 30-day EMA of active addresses has been steadily declining, indicating a significant decrease in network activity compared to previous highs. The network may be approaching a stabilisation phase instead of continuing to deteriorate, since the rate of reduction seems to be reducing despite this longer-term downtrend in activity.
There is a strong correlation between price consolidation just before a major directional shift and the times when active addresses stabilise after prolonged weakening. While the increase of active addresses remains unimpressive, ETH has managed to recover from its recent lows. Given this discrepancy, it appears that improved market sentiment and positioning, rather than a general upturn in on-chain demand, have been driving the continuing recovery. A progressive rise in active addresses and ongoing price appreciation would give stronger evidence that capital and user activity are returning to the Ethereum network, which is necessary for the recovery to develop into a more lasting positive trend. At least until then, we should approach the strengthening technical structure with caution, as there has been no official announcement about on-chain participation. This suggests a cautious optimism rather than a full trend reversal.
