Ethereum is showing signs of life again. Recently, the price bounced from a low near $1,840. In fact, it quickly climbed about 4%. So buyers are clearly stepping back into the market.
But this isn’t just a random price jump. Instead, the setup has been quietly building behind the scenes for weeks. Multiple data points suggest a major shift is happening right now.
Let’s look at the numbers driving this recovery.
RSI Bullish Divergence Shows Weakening Sellers
Currently, Ethereum’s short-term chart displays a symmetrical triangle. This pattern basically means buyers and sellers are fighting for control. Yet, a clear bullish divergence is forming between the price and the Relative Strength Index.
The RSI measures whether selling momentum is getting stronger or weaker. Between early February and February 23, Ethereum’s price kept hitting lower lows. However, the RSI started making higher lows during that same time.
Typically, this pattern means the selling pressure is finally running out of steam. Plus, we saw this exact same signal work perfectly twice earlier this month. For instance, a similar divergence between February 3 and February 13 triggered a 10% price jump.
Massive Drop in Exchange Inflows Changes Everything
The most striking data point comes from cryptocurrency exchanges. Usually, when investors want to sell, they move their coins onto trading platforms. So tracking these exchange inflows gives us a peek into seller intentions.
On February 7, these inflows peaked at about 1.06 million ETH. Since then, that number has completely collapsed down to just 126,000 ETH. Therefore, we are looking at an almost 90% drop in potential selling pressure.
Interestingly, Ethereum’s price still fell about 14% during this specific period. Normally, prices drop because aggressive selling increases. Instead, the price fell while the actual spot selling pressure vanished entirely.
Negative Funding Rates Fuel Short Squeeze Potential
If spot sellers aren’t driving the price down, who is? The answer points directly to derivatives traders. Indeed, the funding rate for Ethereum futures has turned deeply negative.
Since February 7, funding rates dropped from slightly positive to around -0.02%. This means short sellers are actively paying money to keep their bearish bets open. Yet, the total open interest tells a completely different story.
Open interest tracks the total value of active futures contracts. Surprisingly, this metric stayed mostly flat, only dipping slightly from $9.06 billion to $8.88 billion. Consequently, no massive wave of new short sellers has entered the market.
This specific combination creates an unstable situation. When market sentiment turns highly bearish without new money backing it up, prices often reverse violently. As a result, we could easily see a short squeeze force prices much higher.
Long-Term Holder Accumulation Reverses the Trend
Experienced investors are also changing their strategy. We can track this using the Hodler Net Position Change metric. Basically, this shows whether long-term investors are buying or dumping their coins.
Between February 3 and February 20, veterans were selling heavily. In fact, they dumped over 41,000 ETH during that window. But over the past two days, that entire trend completely flipped.
These same investors just reached a net accumulation of over 6,000 ETH. Clearly, the smart money believes the bottom is already in. This kind of buying behavior often happens right before broader market recoveries take off.
Key Resistance Levels to Watch Now
Ethereum still has some work to do to confirm this recovery. First, the price needs to break through resistance at $1,920. Furthermore, pushing past that level would prove the buyers are truly back in charge.
Next, the chart shows another hurdle at $2,020. Then comes the major technical barrier at $2,060. If Ethereum can smash through that $2,060 ceiling, the bounce could quickly accelerate toward $2,200 or even $2,420.
However, the whole bullish setup falls apart if support fails. The absolute critical line in the sand sits at $1,840. If the price drops below that level, we will likely see a painful slide down to $1,740.
This doesn’t look like a standard relief rally to me. The underlying data paints a picture of a market that simply ran out of sellers. Plus, the combination of returning long-term buyers and overconfident short sellers creates explosive potential.
If you are watching the markets right now, keep a close eye on that $2,060 level. Those key resistance zones will determine whether this bounce becomes a full market reversal.
Always trade carefully and manage your risk. Markets can change fast, but right now, the data strongly favors the patient buyers.