Why Ethereum’s Rally Stalled: Technicalities or Just Technicals?
Actionable Market Insights
Why this report matters
Ethereum's recent rally wasn't just about momentum—it was fueled by one of DeFi's most leveraged trades unraveling in real time. As borrowing costs surged and key players pulled liquidity, a cascading unwind began, destabilizing the stETH peg and pressuring ETH’s price action. Technical indicators flashed extreme overbought levels just as retail euphoria reached its peak, creating the perfect storm.
Borrowing dislocations for Ethereum (LHS) as spreads turn negative (RHS)
Meanwhile, Bitcoin remains stuck below its $122,000 ceiling, suggesting a potential shift in volatility regime. But with funding rates repricing lower and altcoin strength fading, are we heading into a deeper consolidation, or just the calm before another breakout? The interplay of on-chain mechanics, ETF flow dynamics, and macro signals could set the stage for what comes next.
Main argument
We identified the breakout in Ethereum and Ripple (XRP) early in our July 9 Trading Signals report (here). We turned bearish on both by July 22 (here), as prices became significantly overbought and approached major multi-year resistance levels. Ethereum, in particular, had rallied back to the key highs of May and December 2024 and was testing the upper boundary of a long-term down-trending wedge dating back to 2021, converging with multiple 2024 peak levels.
At the same time, technical reversal signals, including RSI and Stochastics, reached some of the most overbought readings ever recorded for Ethereum, underscoring the likelihood of a pullback. Recognizing these stretched conditions ahead of time was essential. From the July 9 signal, Ethereum gained +44%, but since our bearish call on July 22, it has already declined by -4%. But is this the dip to buy or the beginning of a deeper pull-back?