Ethereum Price Slumps 4% After $4,000 Breakout Failure, But History Suggests More Upside Coming

Ethereum Pulls Back After Hitting Resistance, But Long-Term Bullish Outlook Remains

Ethereum’s price has pulled back around 4% after failing to break past the key $4,000 resistance level, settling near $3,800 this Monday. This retreat follows a rally that had many optimistic about ETH’s potential to hit new highs, but the $4,000 mark proved too strong for now.

The pullback is not unexpected, as technical indicators like the 14-day Relative Strength Index (RSI) show a bearish divergence, which suggests there could be more short-term downside. As Ethereum’s RSI drops from overbought conditions, there’s the possibility that the price could revisit lower support levels such as the 21-day moving average (DMA) at $3,600, or even test the $3,500 area.

However, despite the immediate downtrend, Ethereum enthusiasts shouldn’t give up hope. In fact, many are still optimistic about Ethereum’s future, believing that the current dip could be a temporary pause in what is shaping up to be a highly bullish market for ETH as we move into 2025.

Elevated Market Risks Suggest a Pullback Is Possible, But Longer-Term Outlook Remains Strong

The increased futures funding rates and rising profitability within the Ethereum market further signal the risk of a mid-bull market pullback. Data from Glassnode reveals that these factors, combined with Ethereum’s price failure to break the $4,000 barrier, could contribute to continued volatility in the short term. Still, this doesn’t mean Ethereum’s long-term prospects are under threat.

The narrative that Ethereum is losing ground to competitors like Solana and Sui has become more common recently, but this sentiment is largely overblown. Ethereum continues to dominate the decentralized finance (DeFi) space, with its blockchain hosting the vast majority of decentralized applications (dApps) and smart contracts.

Currently, over $76 billion in crypto assets are locked in Ethereum’s smart contracts, making up 56% of the DeFi market share according to data from DeFi Llama. Additionally, Ethereum is the only altcoin to have secured approval for spot ETFs in the USA, positioning it as the primary entry point for institutional investors looking to gain exposure to the broader altcoin market.

These factors solidify Ethereum’s strong position in the market and suggest that any future “altcoin season” will likely benefit ETH in significant ways. In fact, it could be argued that “altcoin season” has already arrived, with blockchaincenter.net’s index signaling a clear trend toward altcoins outperforming Bitcoin (BTC). If this trend holds, Ethereum could surge as other altcoins also see growth.

Ethereum Set to Benefit from Altcoin Season and Bitcoin Dominance Breakdown

Bitcoin’s dominance in the market has recently started to decline, marking the first major breakdown since early 2021. Historically, Bitcoin dominance (BTC.D) tends to dip as altcoins gain traction during periods of strong altcoin performance. If this trend continues, BTC.D could fall from its current level of around 56% to as low as 40%, all while Bitcoin’s price remains solid.

While Bitcoin’s dominance is faltering, Bitcoin’s price action itself remains robust. Despite Ethereum’s recent pullback, Bitcoin continues to show signs of strength, bolstered by the bullish market reaction following the U.S. presidential and congressional elections. As we’ve seen in previous cycles, Ethereum often follows Bitcoin’s price trajectory. In the 2020-2021 bull market, Ethereum experienced its own price discovery several months after Bitcoin hit new highs.

The trajectory of Bitcoin’s price over the next few months is crucial for Ethereum. In past cycles, Ethereum has benefited from Bitcoin’s momentum, often seeing price surges once Bitcoin has made its major moves. If history repeats itself, Ethereum is poised for more upside, especially as the broader market shifts into an altcoin-dominated phase.

Will Ethereum’s Price Surpass $4,000 in 2025?

Looking forward to early 2025, Ethereum’s price could see more upward momentum. Bitcoin’s recent rally above the $40,000 mark is already helping to fuel altcoin growth. If Bitcoin continues to break new highs, it’s highly likely that Ethereum will follow suit.

Moreover, Ethereum’s upcoming upgrades and developments, including the ongoing implementation of Ethereum 2.0, should further strengthen its position in the market. Ethereum’s transition to a proof-of-stake model is expected to improve scalability and reduce energy consumption, making it even more attractive to developers and investors alike.

With Ethereum’s strong fundamentals, dominant position in the DeFi space, and historical price patterns, there’s little reason to doubt that the cryptocurrency could reach new heights in the near future—likely surpassing $4,000 and potentially much more. While short-term volatility may continue, the long-term outlook remains bullish, with Ethereum poised to capitalize on an increasingly favorable macro environment for altcoins.