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Why Ethereum Could Still Rally to $3,500 Despite Falling Funding Rates

TLDR

• A chart pattern suggests a 16% rally that could drive the price from $3,400 toward the psychological $4,000 zone.
• The ETH perpetual futures funding rate briefly turned negative, signaling excessive pressure from short sellers.
• The options market shows institutional caution, with an 11% premium on “puts” amid fears of a drop to $2,500.

Ethereum’s price action toward $4,000 has sparked optimism among technical analysts after a bullish signal was detected on the 1-day chart. This pattern suggests an imminent 16% rally aimed at breaking through the $3,500 resistance level.

Currently, the market’s second-largest asset is moving within a descending channel that has defined its trajectory since late 2024. However, buyers are successfully establishing a solid base near $2,800 to attempt a definitive move to the upside.

Derivatives Pressure and Ether ETF Flows

A key event occurred last Wednesday when the perpetual futures funding rate dipped into negative territory. This phenomenon forces short sellers to pay to keep their positions open, which often precedes a bullish “short squeeze” correction.

On the other hand, the institutional landscape appears somewhat clouded following $230 million in net outflows from U.S.-listed spot Ether ETFs. This reversal in capital flow has raised concerns regarding the speed of a short-term recovery.

Despite these headwinds, if the asset manages to consolidate above $3,400, the current range would transform into a launchpad. Should this scenario play out, the path for Ethereum toward $4,000 would be cleared of major technical obstacles.

In summary, sentiment in prediction markets like Myriad remains divided, with a 62.5% probability that the price will visit $2,500 first. The resolution of this conflict will depend on clear economic signals and the restoration of confidence in risk assets.