Ethereum, which surged 31% in August, faces its biggest challenge as it hits the $2,550 wall!

▲ Ethereum (ETH)/ChatGPT generated image ©

Ethereum, which led the market by surging over 30% during August, has entered a consolidation phase after being blocked by the $2,550 resistance level. The key watershed moment now is whether it can maintain the $2,438 support, which will determine its path towards a jump to $2,920 or a plunge to $2,220.

According to investment media TradingNews on September 1 (local time), Ethereum (ETH) surged 31.1% during August but failed to break through the $2,550 resistance level, located near the 50-week moving average at $2,542, three times in a row, retreating to the $2,446 level. The broad weakness seen across major assets like Bitcoin (BTC), Solana (SOL), and XRP (Ripple) during the same period is attributed to global tightening pressures, with the probability of a 25bp interest rate hike in September soaring to 66.4% according to the CME FedWatch Tool, and the US 10-year Treasury yield rising to 4.786%.

Behind the supply and demand that drove this rebound, there is also structural vulnerability. US Ethereum spot ETFs recorded net inflows of $1.42 billion for 9 consecutive trading days from August 17 to 28, but the concentration on a specific asset manager was severe, with BlackRock's single ETHA fund accounting for 72% of the total inflows. The daily Relative Strength Index (RSI) rising to 80.39, entering the overbought zone, and a significant portion of the inflows being attributed to short squeezes (buying pressure resulting from the liquidation or covering of short positions) suggest a weak underlying spot demand.

Overheating in the derivatives market and seasonal factors are exacerbating downward pressure. With futures open interest increasing to $32.48 billion, 70.7% of Binance accounts are skewed towards long positions, exposing them to the typical risk of a long squeeze. The concentration of leveraged positions, particularly a $102.3 million 10x leveraged long position with a liquidation price set at $2,241, is also a burden. Furthermore, the historical September Ethereum returns, averaging minus 10.2% and a median of minus 12.7%, make it the second weakest month of the year, which also weighs on buying sentiment.

On the other hand, supply-side defenses and ecosystem fundamentals remain robust. Over 42 million ETH, accounting for 35% of the total circulating supply, have been staked, removing them from market liquidity. Bitmain also holds 5.85 million ETH, 87% of its holdings, as treasury assets. Furthermore, momentum could build if the September public testnet schedule becomes clear ahead of the Glamsterdam upgrade in the second half of the year.

Experts presented a sideways trend within a box range of $2,220 to $2,550 as the likely base scenario ahead of the Federal Open Market Committee (FOMC) meeting on September 16. They predict that if the $2,438 level breaks on a weekly closing basis, a cascade of liquidations could occur down to the SuperTrend support levels of $2,212.19 and $2,000. Conversely, a decisive breakthrough of $2,550 on a daily closing basis could open an upward path to $2,800 and $2,920.

*Disclaimer: This article is for investment reference only, and we are not responsible for any investment losses based on it. The content should be interpreted for informational purposes only.*