Ethereum Risks 40% Drop as Bear Flag Breakdown Looms

Ethereum (ETH) is trading around $2,900, marking a 1% decline over the last 24 hours and a more than 10% drop for the week. The asset has struggled to regain strength after falling below the psychologically important $3,000 level and recently testing support in the $2,700–$2,800 range. The technical outlook has grown increasingly precarious, with analyst Trader Tardigrade highlighting a bear flag pattern forming on Ethereum’s 3-day chart. This pattern, typically characterized by a sharp initial drop, often precedes further downside momentum.

Trader Tardigrade’s analysis indicates that Ethereum is now breaking below the lower support of this bear flag formation. The analyst issued a specific and time-sensitive warning: “It has 1 day and 19 hours to reclaim above $2,906 to avoid this breakdown.” Should the asset fail to close above this key level within that window, the technical projection based on the pattern’s measured move points to a target of approximately $1,666. This represents a potential decline of over 40% from current price levels, underscoring the severity of the risk identified in the chart.

While the price action appears bearish, derivatives data presents a more nuanced picture. Analyst Ted noted that Ethereum is trading flat near $2,900 following a strong selloff. Interestingly, open interest—the total number of outstanding derivative contracts—has been rising, reaching 5.255 million. This increase suggests that more trading positions are being opened despite the sideways price movement, potentially indicating that traders are positioning for a significant upcoming move.

However, other metrics suggest cooling speculative interest. The funding rate, while still slightly positive at 0.0011, has dropped from previous levels. As Ted observed, “Old degens got liquidated, and now new ones have arrived,” pointing to a shift in market participants. More concerning for the bullish thesis is on-chain data from analyst Ali Martinez, which shows a steady decline in Ethereum holdings by large investors, or ‘whales,’ since early January. This trend persists even though, as noted by analyst CW, the current ETH price range aligns with historical zones where these whales have previously accumulated assets. The divergence between price level and whale behavior suggests larger accounts are exercising caution.

The Ethereum story extends beyond its USD pair. Michaël van de Poppe, founder of MNF Fund, emphasized the importance of the ETH/BTC trading pair, which is currently holding at a critical support level that has proven significant in the past. Although the pair is now trading below its 21-day moving average, van de Poppe stressed, “It would be enormously important to be holding this level.” A successful defense of this support could pave the way for Ethereum to gain strength relative to Bitcoin. Conversely, a breakdown would signal further weakness for ETH against the market leader.

This technical vulnerability is compounded by broader market headwinds. Ethereum exchange-traded funds (ETFs) have recently posted losses, reflecting the price weakness and contributing to a negative sentiment loop. The convergence of factors—a looming technical breakdown on the USD chart, declining whale accumulation despite attractive prices, a precarious position against Bitcoin, and underperforming ETFs—collectively suggests a market gripped by caution. The immediate focus remains on whether Ethereum can muster a recovery above $2,906 to invalidate the bear flag pattern, or if it will succumb to the downward pressure targeting significantly lower levels.