Ethereum has reclaimed the $2,000 price mark, rallying alongside the broader crypto market following the Federal Reserve’s decision to hold interest rates steady on May 7. While this has triggered optimism among investors, key on-chain signals suggest the rally may be short-lived. Ethereum’s Market Value to Realized Value (MVRV) ratio has dropped into a zone historically associated with selling pressure, raising concerns that a bearish reversal could be on the horizon.

The Fed’s move to maintain interest rates between 4.25% and 4.50% gave a boost to risk-on assets like cryptocurrencies. Investors, now more confident in near-term economic stability, began pouring money into digital assets, sending Bitcoin past the $100,000 mark for the first time since February and pushing Ethereum above $2,000. This positive momentum was supported by renewed institutional interest, notably two consecutive weeks of inflows into Ether-based ETFs, as reported by CoinShares.

Another factor aiding Ethereum’s rally is the recent implementation of the Pectra upgrade, introduced on May 7. The upgrade has been seen as a positive development by the community, helping to increase investor confidence and contribute to ETH’s price jump. In the last 24 hours, Ethereum’s price has surged over 13%, trading at $2,048 at the time of writing.

However, despite the price increase, on-chain data reveals that the rally might not be as strong as it appears. According to IntoTheBlock, Ethereum’s MVRV ratio has dropped to 0.888. This metric, which compares the current market value of Ethereum to the average price at which it was purchased, suggests that many investors are currently holding ETH at a loss. Typically, a low MVRV ratio can indicate a potential bottom, but in this case, the fact that prices are rising while the ratio remains low signals that some investors may be panic selling.

Adding to the complexity, Ethereum witnessed significant liquidation activity over the past day. Data from Coinglass shows that over $175 million in ETH positions were liquidated, with sellers bearing the brunt—$148 million in forced liquidations compared to $27 million in buyer closures. Despite this, open interest in Ethereum futures has climbed 18%, reaching $24.8 billion, suggesting growing trader interest even amid market uncertainty.

Large-scale investor behavior also offers a mixed picture. On the bullish side, market maker Wintermute made significant ETH purchases in the last 24 hours, potentially looking to benefit from short-term volatility. Meanwhile, data from Lookonchain revealed that investment firm Abraxas Capital withdrew over 41,000 ETH—worth approximately $75 million—from Binance and Kraken, signaling accumulation by institutional entities. Yet, despite these large movements, nearly half of Ethereum wallets—around 65.5 million addresses—remain underwater, holding ETH at prices above current levels.

Looking ahead, ETH is sitting close to a key resistance level at $2,109. If buyers can break through this level, Ethereum may build momentum and target the next resistance near $2,500. Technical indicators show a possible continuation of the uptrend, with ETH currently trading above major moving averages. However, the Relative Strength Index (RSI) is hovering around 78—deep in the overbought territory—which typically suggests a short-term correction is likely.

On the downside, if sellers regain control and push the price below the moving averages, Ethereum could fall to support near $1,734. Should that level break, the next major support lies around $1,542. These levels could attract fresh buying, but they also present risk zones where bearish momentum could accelerate.

In summary, Ethereum’s recent price surge has been driven by macroeconomic factors, technical upgrades, and renewed investor interest. However, bearish signals from the MVRV ratio and overbought RSI levels indicate that the rally could face a near-term correction. The next few days will be crucial in determining whether bulls can maintain momentum or if bears will take over. As always in crypto, volatility remains the only constant.