Disclaimer: The findings of the following analysis are the sole opinions of the writer and should not be considered investment advice.
Ethereum price has been hovering inside a trading range since the sell-off in January. The recent downswing caused around the FOMC meeting on 4 and 5 May seems to have triggered a massive sell-off that could breach the formed range.
Investors need to pay close attention to the ETH as the incoming drop could provide a good chance to buy the dip.
Ethereum price readies for more descent
Ethereum price crashed 33% between 18 and 24 January and set a swing low at $2,158. This downswing was met by many investors who rushed to buy the dips. As a result, ETH rallied 51% in the next two weeks or so to set a swing high at $3,266. This move, set a range that is still in play.
More often than not, ranges are easy to spot and trade. As mentioned in previous articles, the asset usually sweeps one of the range limits and heads in the opposite direction to do the same. For Ethereum price, the 51% run-up was followed by a pullback under the 50% retracement level at $2,712. The rally emerged at the end of this correction pushed ETH up by 55% to sweep the range high.
The failure to maintain the momentum on this upswing led to a steep reversal that pushed ETH back inside the range. Although there was a minor bounce around $2,712, the buyers were overwhelmed by sellers after the flip of this foothold into a resistance barrier on 6 May, which was around the time of the FOMC.
The selling pressure stacked, causing a steep drop to $2,360, where Ethereum price currently trades. As this downswing continues, ETH is likely to retest the $2,297 support floor, which is likely to provide a brief spike in buying pressure.
Investors need to be prepared for a breakdown of this barrier and a sweep of the range low at $2,158. A quick move below this level could be followed by a recovery above this level. However, in dire cases, Ethereum price might retest the -0.27% retracement level at $1,859. The most perfect place to buy the dip would be the $1,730, below which is the sell-stop liquidity formed in May and July 2021.
ETH Perpetual Futures | Source: Tradingview
Adding credence to buying the dip thesis is the supply distribution chart, which shows that ETH wallets holding between 10,000 and 100,000 ETH have increased from 1187 on 9 May to 1,187 as of 9 May, indicating that these holders are adding more to their bags.
This development suggests that these high net-worth investors or institutions are bullish on Ethereum price.
Supply Distribution | Source: Santiment