I. Market Review
Yesterday, ETH experienced a rapid decline after reaching the 4650–4680 resistance area, with the intraday low dropping to around 4500, followed by a quick rebound recovering the losses. A long lower shadow candlestick with a mid-sized body formed on the K-line, indicating clear characteristics of a typical washout structure.
II. Analysis of Washout Causes
Key resistance level triggers short-term selling pressure
The 4650–4680 range is the technical resistance zone for the recent rebound, coinciding with the densely traded area at previous highs. The bulls and bears are fiercely contending in this area, and short-term profit-taking occurs before key resistance, driving the price down.
High-leverage long positions are cleaned out
Recently, the open interest and leverage ratio of ETH perpetual contracts have continued to rise, with funding rates remaining high. The main force quickly smashed the price at high levels, triggering the stop-loss and forced liquidation of some high-leverage long positions, achieving the purpose of cleaning up floating chips while lowering holding costs.
Emotional panic amplifies volatility
During the sharp decline, the trading volume surged instantly, causing a temporary panic in the market, and some following long positions were forced to exit. However, the volume quickly recovered during the rebound, indicating that mainstream funds did not retreat but rather took the opportunity to accumulate.
Optimization of chip structure
The essence of the washout is turnover. Through a sharp decline, unstable chips are shaken out, allowing the main force to complete chip structure adjustments, reducing upward selling pressure during subsequent rises, and accumulating momentum for the next phase of the market.
III. Future Market Outlook
This washout did not damage the mid-term upward trend of ETH; instead, it formed a new support area in the 4480–4510 range. If the subsequent volume can cooperate and break through the 4680 resistance area, the mid-term rebound target is expected to further expand to the 4800–4950 range. In terms of short-term operations, attention can continue to be paid to the effectiveness of the support area; if it is lost, caution should be exercised regarding a delay in the mid-term rhythm.
Summary:
Yesterday's sharp decline was more of an active washout rather than a trend reversal. Advanced traders should recognize the essence of this chip cleaning and view it as a technical action before the continuation of the trend, rather than a signal of a peak.
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