Ethereum is already showing early signs of recovery. From its recent lows around $1,840, Ethereum is up nearly 4%, indicating that buyers are starting to return. This backlash is not happening randomly. The Bounce setup has been secretly under construction for several weeks.
Several fundamental signals now point to change. Selling pressure suddenly collapsed. Derivatives traders actively turned bearish without adding any new positions. At the same time, long-term holders are buying again after weeks of selling. Taken together, these forces suggest that Ethereum’s current pullback could be even bigger.
Ethereum bounce setup emerges as bullish divergence grows
Ethereum’s short-term chart shows a symmetrical triangle. This pattern reflects indecision as buyers and sellers compete for control.
At the same time, a bullish divergence is emerging between prices and the Relative Strength Index (RSI). RSI is a momentum indicator that measures whether selling pressure is increasing or weakening. From early February until today (February 23rd), the Ethereum price has made new lows, while the RSI has made new lows. This pattern often indicates that selling pressure is waning.
Ethereum price structure: TradingView
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This same signal worked recently. From February 3rd to February 13th, a similar divergence caused a nearly 10% rebound. There was another divergence between February 3 and February 15, leading to a 6% increase.
Ethereum has already started responding again. The recent 4% rally suggests that buyers are reacting to weakening downside momentum. But technical signals alone are not enough. The bigger question is what has changed beneath the surface.
Selling pressure collapses by 90% despite falling prices, new trigger revealed
The most important changes are brought about by foreign exchange inflows. Exchange inflows measure the number of coins flowing into an exchange. When a coin moves to an exchange, it usually indicates intent to sell.
On February 7th, inflows to the Ethereum exchange reached nearly 1.06 million. $ETH. Since then, the number of inflows has fallen to just 126,000. $ETH. This means the potential selling pressure is reduced by almost 90%.
Foreign exchange inflow: Santiment
This change becomes even more significant when compared to price. During the same period, Ethereum’s price still fell by about 14%. Typically, when selling pressure increases, prices fall. However, as soon as the selling pressure disappeared, the price fell.
$ETH price decline”>
$ETH Price drop: TradingView
This indicates that the decline was not caused by aggressive spot sales. Rather, it suggests that the weakness comes from another source. The source of the information appears to be a derivatives trader. Ethereum’s funding rate has turned significantly negative. When funding is negative, short sellers pay money to maintain their bearish positions.
Since February 7, funding rates have fallen from slightly positive levels to around -0.02%. This marks one of the most bearish sentiment reversals in recent weeks.
Open Interest: Santimento
However, open interest is a different story. Open interest measures the total value of active futures positions. During this period, open interest remained almost flat, declining only slightly from approximately $9.06 billion to $8.88 billion.
This combination is important. This indicates that new short positions are not being actively entered. Rather, existing traders have turned bearish and their long positions are likely to have been liquidated.
This type of setup can be unstable. When there are no large new positions and bearish sentiment increases, the market becomes vulnerable to a short squeeze. A short squeeze occurs when a rise in price forces short sellers to close their positions, causing the price to rise further.
This helps explain why Ethereum’s rally could extend beyond a simple short-term rally.
Long-term holders suddenly turn buyers after several weeks of selling
Another important change comes from long-term holders. The Hodler Net Position Change Indicator measures whether long-term investors are buying or selling.
From February 3 to February 20, this indicator remained negative. This showed continued selling by experienced investors. At its peak, long-term holders sold more than 41,000 shares. $ETH On a net basis. However, this trend is now reversed. Over the past two days, this indicator has turned positive, with a net cumulative count of over 6,000. $ETH.
$ETH holder”>
$ETH Holder: Glass node
This confirms that experienced investors have resumed buying. This type of build-up often occurs near local bottoms when long-term investors place early positions before a broader recovery begins.
Ethereum’s bounce setup now has stronger structural support as selling pressure subsides, bearish sentiment in derivatives expands, and long-term buyers return.
Ethereum price faces key breakout level that could extend the rebound
Ethereum is currently facing some significant resistance levels. The first major level is located at $1,920. A breakout above this level would confirm the strengthening of momentum. The next resistance lies at $2,020, followed by a major barrier near $2,060, a key technical level that could experience maximum resistance.
If Ethereum breaks above $2,060, the rebound could accelerate towards $2,200 and even $2,420.
However, a bullish setup depends on holding support. The key downside level remains $1,840. If Ethereum falls below this level, the bounce structure will fail. In that case, the next downside price target would be around $1,740.
Ethereum Price Analysis: TradingView
For now, Ethereum’s rally is no longer just a bailout rally. Selling pressure collapsed by nearly 90%. Bearish sentiments grew as strong confidence was not achieved. And long-term holders have quietly returned as buyers.
These combined forces suggest that Ethereum’s current pullback could be the early stages of a larger move, with the next breakout level being the definitive trigger.
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