The start of 2025 has caught everyone off guard. Despite the election of a crypto-friendly U.S. president, who many believed would spark a new bull market, the cryptocurrency sector has taken a surprising downturn. With Bitcoin, Ethereum, and other major coins struggling, the markets are leaving traders questioning what’s next.
Key Highlights:
- Ethereum’s price has dropped below $2,999, sparking concerns among investors.
- The shift from a deflationary to an inflationary supply is adding to bearish momentum.
- On-chain metrics and technical indicators suggest a potential rebound if key levels are reclaimed.
Why Is Ethereum (ETH) Struggling?
Ethereum’s price has faced significant pressure at the start of 2025, declining more than 15% in the past week. This downturn has pushed ETH below the $3,087 support level, amplifying concerns among traders.
One major factor behind Ethereum’s current struggles is the increase in its supply. Since April 2024, the network’s total supply has grown by 0.37%, reaching 120.4 million ETH. This inflationary trend contrasts with the deflationary environment Ethereum experienced post-Merger, reducing its appeal to investors.
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Ethereum’s Technical Overview
On the 4-hour chart, Ethereum remains in a clear downtrend, with the price falling below critical support at $3,087. Technical indicators provide a mixed outlook.
The Relative Strength Index (RSI) on shorter timeframes has entered oversold territory, currently at 22. This suggests the possibility of a short-term bounce. However, Ethereum remains below the 50-day and 200-day moving averages, signaling continued bearish momentum.
On the daily chart, RSI sits near 32, another sign of oversold conditions. Prices have also dipped from a recent consolidation zone of $3,189 to $3,330. If ETH fails to hold above $3,000, further declines are likely.
Longer-Term Price Trends
Zooming out to the weekly chart, Ethereum has been in a downward trajectory since hitting $4,010 on December 2, 2024. This steady decline is partly due to weakening funding rates and rising concerns over inflationary supply levels.
However, there’s a glimmer of hope. Recent data from CryptoQuant shows funding rates beginning to recover, indicating that some traders are betting on a reversal. If funding rates continue to climb, it could signal the start of a bullish phase for Ethereum.
The ETH/BTC Ratio: A Key Metric
Ethereum’s performance relative to Bitcoin is another critical factor. The ETH/BTC ratio recently hit a four-year low of 0.30, reflecting Ethereum’s underperformance compared to Bitcoin. Despite this, the ratio has formed a double-bottom pattern, a technical signal often associated with market reversals.
If Ethereum can capitalize on this pattern and break key resistance levels, it could regain momentum. Reclaiming the $3,600 mark would confirm a bullish shift and boost confidence among investors.
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Support and Resistance Levels to Watch
Ethereum’s immediate future hinges on its ability to hold key support levels and break through resistance zones. The $3,000-$3,087 range is critical for maintaining investor confidence. On the upside, the 50-day Exponential Moving Average (EMA) represents a significant resistance level that Ethereum must overcome to confirm a reversal.
If ETH can stabilize and reclaim the $3,600 level, it could set the stage for further gains in Q1 2025. Broader market trends, particularly Bitcoin’s price movements, will also play a vital role in shaping Ethereum’s trajectory.
What Lies Ahead for Ethereum in 2025?
Ethereum’s current price action reflects a mix of challenges and opportunities. The shift to an inflationary supply, combined with bearish technical indicators, has weighed heavily on its performance. However, signs of recovery in funding rates and the ETH/BTC ratio hint at a potential turnaround.
While the road ahead remains uncertain, Ethereum’s long-term fundamentals and community support suggest resilience. If ETH can navigate its immediate challenges and reclaim critical levels, it could regain its footing and set the stage for a stronger 2025.
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