Ethereum (ETH) price is compressing into a tight bearish pennant formation on the daily chart, signaling a potential decisive move as downside risks continue to build. The technical pattern, characterized by converging support and resistance lines, suggests a high likelihood of a continuation of the prevailing bearish trend rather than a reversal.
The bear pennant structure is clearly defined, with the pattern set to resolve once the price breaks below the lower trend line at approximately $1,950. If a valid breakdown occurs, the primary downside target is the recent swing low of $1,740. A more pessimistic measured target, based on the height of the preceding downtrend, places ETH price as low as $1,100, representing a potential 43% decline from current levels. Analyst Crypto Patel notes that ETH must hold the $1,800 support level to invalidate the bearish pennant setup.
Volume behavior is cited as the key confirmation signal for any breakdown. The current consolidation phase has been accompanied by declining volume, typical of compression. For a bearish move to be considered valid, it must be accompanied by a strong expansion in sell-side volume. Without this confirmation, any breakout risks being short-lived.
The weakening technical setup is compounded by declining on-chain and network activity. Ethereum's daily transaction count dropped to 1.95 million, down 33% from 2.9 million on February 5. A similar sharp drop in January 2024 preceded a 30% price decline.
Further negative signals come from the decentralized finance (DeFi) ecosystem. The total value locked (TVL) on Ethereum smart contracts has fallen to $54.5 billion from $70 billion at the start of the month, a decrease of over 22%. Deposits on major platforms like Uniswap dropped 26%, while Ether.fi and EigenLayer saw a 35% drop. Daily trading volume on Ethereum-based DEXs plummeted to $1.5 billion from $3.72 billion over the same period.
Adding to the selling pressure, global Ethereum investment products witnessed net outflows of $85.1 million between February 9 and February 13. From a market structure perspective, Ethereum has not shown signs of reversal, with lower highs remaining intact. The analysis concludes that until price breaks above the pennant's upper boundary with volume, rallies should be treated as corrective, and the altcoin remains vulnerable to downside continuation.
