Ethereum (ETH), the second-largest cryptocurrency by market capitalization, has recently shown signs of potential price weakness after a strong price surge. As the price nears a critical resistance level, both whales and long-term holders appear to be pulling back, fueling speculation that a decline may be imminent. With growing bearish signals and increased selling pressure, the question remains: is $3,500 the next target for ETH?

ETH Faces Price Decline After Surge

Ethereum saw a significant surge in price, climbing more than 15% and reaching $4,100 for the first time since March 2024. However, this milestone has not been kind to ETH in the past. Historically, each time Ethereum has reached this level, it has faced a sharp price correction, followed by increased selling pressure. The price action suggests that Ethereum might be encountering a similar fate once again.

Rising Exchange Reserves Signal Increased Selling Pressure

One of the key indicators of potential price declines is the rise in Ethereum’s exchange reserves. According to on-chain analytics firm CryptoQuant, ETH exchange reserves have surged by nearly 100,000 ETH (worth approximately $400 million) in recent days. This suggests that more Ethereum is being deposited on exchanges, potentially signaling increased selling pressure as ETH approaches its six-month high.

Whale Activity and Shrinking Interest in ETH

Along with the rising exchange reserves, whale activity is pointing to a shift in sentiment. Whales, including prominent figures like Justin Sun, are showing signs of reducing their exposure to Ethereum. On December 16, 2024, Sun’s linked wallet address withdrew 52,905 ETH (worth about $209 million) from the staking protocol Lido Finance. This movement suggests that whales are either taking profits or losing interest in holding ETH long-term.

The increased activity of whales withdrawing from staking indicates a possible reduction in confidence regarding Ethereum’s future price movement. These large transactions could add further pressure to the price as they reflect broader market sentiment.

Technical Analysis: Bearish Patterns and Key Levels

From a technical analysis perspective, Ethereum is showing signs of forming a bearish double-top pattern at the $4,100 resistance level. A double-top pattern occurs when the price reaches a peak, pulls back, then rises again to retest the same level before declining. This pattern is often seen as a strong signal of potential price reversal.

Additionally, the Relative Strength Index (RSI) for ETH is declining, which further signals a bearish divergence. RSI is a momentum oscillator, and when it falls while the price continues to rise, it suggests that the upward momentum is weakening. This combination of technical indicators supports the notion that Ethereum could face a decline in the near future.

ETH Could Drop to $3,500

Given the recent price action and technical indicators, there is a strong possibility that Ethereum could experience a 12% decline, bringing the price down to the $3,500 level. The formation of the double-top pattern, combined with the declining RSI, suggests that Ethereum may struggle to break through the $4,100 resistance level, and a pullback to $3,500 is becoming more likely.

Current Market Sentiment

As of the latest data, Ethereum is trading around $3,970, reflecting a modest price decline of 0.80% over the past 24 hours. During this period, trading volume has surged by 60%, indicating heightened market participation amid the recent price surge. While this suggests strong interest in ETH, it also reflects the increased volatility that comes with such a surge, as traders adjust their positions based on the prevailing market conditions.