Ethereum’s price has faced significant challenges throughout the initial months of 2025, dropping sharply after reaching resistance at the $4,000 mark in December. With a nearly 20% decline since its December high, the crypto market has witnessed a sell-off affecting not just ETH, but also major cryptocurrencies like Bitcoin and other altcoins.
Recent data indicates that the downturn mainly stems from outflows from Ethereum spot exchange-traded funds (ETFs). On January 7, these ETFs experienced net outflows of $259 million, indicating a growing trend of liquidations among investors. Despite these outflows, it’s noteworthy that Ethereum ETFs have attracted a remarkable $2.5 billion in net inflows since their approval in 2024, showcasing substantial interest and confidence in Ethereum’s future.
Additionally, an increase in Ethereum balances on exchanges has been observed, rising from 15.3 million to 15.85 million ETH held as of January 9. Typically, a surge in exchange balances signals that investors are looking to liquidate their positions, a situation often driven by investor sentiment and market volatility.
From a macroeconomic viewpoint, Ethereum is navigating through a turbulent landscape influenced by rising U.S. bond yields, with the 30-year bond yield soaring to 4.96%, its highest since October 2023. This scenario is largely due to a hawkish stance from the Federal Reserve concerning persistent inflation concerns, impacting the cryptocurrency market broadly.
However, the analysis of Ethereum’s price charts introduces an intriguing aspect to its current state. An examination of the weekly chart reveals Ethereum is forming a widely recognized bullish reversal pattern: the inverse head and shoulders. The left shoulder has formed at $2,825, while the head has been established at $2,155. As long as ETH maintains its price above $2,825, this bullish outlook remains intact.
A confirmed breakout scenario could occur if Ethereum (ETH) successfully surges above the neckline at $4,085. Should this breakout materialize, traders would watch for the next key levels of $4,865 (the all-time high) and the psychological threshold of $5,000. Conversely, a fall below the right shoulder at $2,825 would negate this bullish perspective, indicating a need for caution among potential investors.
In conclusion, while Ethereum faces significant headwinds due to recent market dynamics, the formation of an inverse head and shoulders pattern suggests the possibility of a bullish resurgence. Investors are advised to monitor these crucial price levels closely as the market continues to evolve.
