Ethereum’s price has fallen sharply over the past 24 hours, dropping from around $4,300 to nearly $3,400 before partially rebounding to around $3,800. The move came in tandem with about $19 billion in cryptocurrency liquidations, one of the biggest single-day drops this year, led by a tariff dispute between China and the United States. The sudden flash wiped out long positions on major exchanges and sent traders scrambling to hedge in futures markets.
Ethereum is down about 13% at the time of writing, but early signs from derivatives and technical charts suggest that the decline may have gone too far and that a rally may be forming behind the scenes.
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Although bearish positioning strengthens, derivatives hint at the possibility of a rebound
A crash of this magnitude rarely starts in the spot market. They start with derivatives, where both profits and losses are magnified through heavy leverage.
Ethereum’s funding rate (the fee traders pay or receive for holding perpetual futures) reversed from +0.0029% on October 9th to -0.019% by October 11th.
A negative funding ratio means short traders are paying out long traders, indicating that most of the open interest is currently betting on further downside.
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While this imbalance is bearish on the surface, it could also create a setup for a pullback. When shorts become overcrowded, even a small price pullback can cause a short squeeze, forcing traders to buy back their positions and driving the price higher.
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The second derivative metric supports this view. The taker-buy ratio, which measures whether active trades favor buying or selling, has rebounded from 0.47 to 0.50 in the past 24 hours.
This change means buyers are now matching sellers in volume, an early sign that a sell-off may be near.
The last time this ratio reached a similar level (local peak) was on September 28th, when Ethereum rose by 13%, rising from $4,140 to $4,680.
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Taken together, these data suggest that the market’s bearish positioning may actually be setting the conditions for a rebound rather than a deep crash. Technical charts should reveal more.
Hidden divergence strengthens case for Ethereum price recovery
Ethereum’s price chart lends further weight to this idea. On the daily time frame, Ethereum is showing a hidden bullish divergence. This is a pattern formed when price makes higher lows but the relative strength index (RSI) makes lower lows.
RSI measures momentum from 0 to 100. This deviation from price indicates that sellers are losing power, even if price has not yet fully recovered.
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This same configuration appeared between August 2nd and October 10th. The last time Ethereum outputted this signal was from August 2nd to September 25th, when it rose almost 25% within a few days.
If Ethereum is above $3,430 (major support), the current rebound setup remains in effect. A breakout of $3,810 (another important support) and $4,040 could confirm a short-term recovery and set a target near $4,280, about 13% higher than current levels.
However, a break below $3,350 will invalidate that structure and momentum will switch back to the bears. For now, the collapse in Ethereum prices may have created its own rebound zone.
With heavy shorting and a quiet return to technical strength, a recovery towards $4,280 is looking increasingly likely if buyers hold onto key supports. All that is needed to regain strength is a daily candlestick close above $3,810.
