Ethereum's price recovery has prompted a rush of buyers: Are they ignoring warnings of a 17% drop?

Ethereum (ETH) is trading around $2,130, up 3.6% on the day and up 8.2% over the past month. The intraday rally attracted whales and several large Longing positions. However, the 8-hour chart is quietly forming a pattern that could wipe out this gain—and even more.

The interesting point here is the discrepancy between the positive sentiment based on on-chain data and the technical risks. Ethereum whales and leveraged traders expect further price increases. But the chart structure suggests a potential downward correction of up to 17%. Only one side will be right, and the cluster of EMAs currently hovering around the current price will be the key factor in determining that.

Whales and Derivative positions are strongly skewed toward an uptrend.

Ethereum whales have acted decisively. According to Santiment data, the amount of ETH held by whales (excluding those held in exchange wallets) increased from 121.74 million ETH on March 23, 2024, to 122.55 million ETH in just 24 hours. This represents a net increase of approximately 810,000 ETH in a single day, equivalent to a value of around $1.7 billion at current prices. This timing also coincided with the day's recovery, indicating that whales took advantage of the strong upward market signals to accumulate their holdings.

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Ethereum Derivative positions also reinforce bullish sentiment. Data from the ETH/ USDT perpetual contract liquidation map on the Gate exchange over the past 30 days shows total leverage of Longing positions reaching $4.83 billion, far exceeding Short positions at only $3.18 billion. This means the value of Longing orders is approximately 52% larger. The market is heavily betting on an upward price movement.

When whales are buying spot and Derivative positions are leaning towards Longing at the same time, it's often a sign of strong short-term confidence. However, confidence cannot replace chart structure. And the pattern forming on the 8-hour chart is something buyers shouldn't ignore.

The 8-hour chart is forming a pattern that buyers may be missing.

The 8-hour chart is forming a Vai-and- Vai pattern with an upward-pointing neckline and a 17% downside target. An upward-pointing neckline typically indicates sustained buying pressure below, consistent with whale accumulation. However, when this buying pressure weakens, the price usually falls more sharply because the crucial support level is broken, and those who relied on it lose confidence.

The risk is further increased as Ethereum's price is currently sitting right above the EMA cluster. All three Exponential Moving Averages (EMAs) – 20, 50, and 100 periods – are converging in the $2,110 – $2,130 range. When multiple EMAs converge at the same price level, a breakout in any direction will lead to stronger volatility. The last time ETH broke below the 20-period EMA on the 8-hour chart (March 18, 2024), the price dropped by approximately 8%.

Simultaneously, the risk is further amplified by the bearish divergence of the RSI. From February 25, 2024 to March 23, 2024, the price of ETH peaked higher , but the Relative Strength Index (RSI) peaked lower. According to traditional bearish divergence signals, the upward momentum is weakening even though the price continues to rise.

The simultaneous appearance of a Vai-and- Vai pattern, a threatened EMA cluster, and bearish divergence on the RSI has created a contrasting picture to the wave of optimism from whales and Derivative markets. Price will decide which story unfolds.

Ethereum's price is currently in bearish territory.

The immediate battleground is $2,110, coinciding with the Dip of the EMA cluster. If the price closes below this level on the 8-hour timeframe, support from the moving Medium will be broken, and selling pressure will intensify towards $2,050.

The $2,050 level is extremely important because it contains both the 0.382 Fibonacci level and the neckline of the Vai-and- Vai pattern. If this area is broken on the 8-hour chart, the pattern will be officially activated. The peak of the pattern was around $2,380, and a break below the neckline could result in a 17% drop to around $1,700. During the decline, $1,970 and $1,830 will be temporary support levels. In the worst-case scenario, ETH could fall to around $1,600.

A drop in ETH price below $2,050 could trigger a massive wave of Longing position liquidations. Currently, there are a total of $4.83 billion in leveraged Longing positions placed below the current price; if the neckline is broken, these Longing positions will be forced to close, creating further selling pressure and accelerating the correction towards the Vai and Vai (H&S) pattern target. The very act of placing orders expressing bullish belief could become the "engine" for a bearish scenario if the pattern is confirmed.

To break this bearish pattern, ETH needs to reclaim the $2,190 level at the close of the 8-hour candle, and then continue to surpass the peak around $2,380. Only then will the Vai and Vai pattern be invalidated. Currently, Ethereum's price is sitting just above the EMA cluster, Chia the optimism of whales from the possibility of a 17% correction following the Vai and Vai pattern.