Key takeaways:
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Ether slipped under $4,300 after failing to sustain momentum above $4,700, with $338 million in liquidations adding to the sell pressure.
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Analysts highlight $4,300 as a pivotal support, but the history of September weakness raises the risk of a 10% drawdown.
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An open interest contraction and negative funding rates suggest long positions are being flushed, which could set up a rebound if spot demand returns.
Ether (ETH) failed to sustain momentum above the $4,700 resistance this week, slipping back under $4,300 region on Friday, where a critical ascending trendline support, popularized by Fundstrat’s Tom Lee, was breached.
The move comes amid thinning market liquidity and follows a broader $338 million liquidation of Ether futures positions between Aug. 22 and 23, raising the probability of a deeper correction into September.
Lee and Fundstrat analyst Mark Newton flagged the $4,300 level as a pivotal floor on Tuesday, citing neutral relative strength index (RSI) readings and a still-bullish Ichimoku cloud structure as reasons for optimism.
However, the current situation seems bleak with September seasonality casting a shadow over the bullish setup. Data from CoinGlass indicates September has historically been Ether’s weakest month, with the altcoin posting its worst median returns of -12.55% during this period. That historical bias toward drawdowns suggests near-term risks remain skewed to the downside if Ether loses key support at $4,300.
Related: ETH possibly bullish ‘for years’ as megaphone pattern to $10K emerges: Analyst
Rising divergence in Ether open interest trends
Futures positioning has also turned cautious. According to analyst Amr Taha, the daily percentage change in ETH open interest (OI) registered a higher low compared to its last trough, but absolute open interest fell to a lower low on Binance. This divergence points to structural imbalance, with retail traders closing out long exposure rather than adding new positions.
Total ETH OI contracted to roughly $9 billion. Interestingly, the last time open interest compressed to this mark, ETH rebounded sharply to $4,900, suggesting a similar clearing of excess leverage could lay the groundwork for recovery.
At the same time, funding rates across major exchanges flipped negative, indicating short dominance in perpetual markets. The combination of falling open interest and negative funding rates confirms that longs are being flushed, not initiated.
However, historically, such conditions can also precede sharp reversals, as negative funding often signals overcrowded short positioning that can fuel a faster-than-expected bullish rebound once spot demand steps in.
From a technical standpoint, higher time frame charts exhibit weakness heading into the monthly close. Historically, the beginning of September has the highest likelihood of a correction, so the possibility of a 10% dip from current prices could take place in the first week.
The immediate support to watch is near $4,180, though a decisive rebound from this level appears less likely given that the current breakdown follows a prolonged bullish phase.
Instead, market participants may be positioning psychologically below the $4,000 threshold, with the $3,900–$3,700 zone aligning with a daily fair value gap (FVG) that could attract bids.
Should this zone fail, attention would shift toward the next FVG between $3,100 and $3,300. This region could serve as a pivotal inflection point for a broader bull market continuation.
A breakdown below would mark a significant shift in the higher time frame structure and potentially raise questions about the sustainability of Ether’s ongoing bull cycle.
Related: CoinShares reports 26% AUM increase to $3.46B in Q2
This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.
