Ethereum Faces Key Resistance at $3,400 as Analysts Predict a Potential Rebound

Ethereum must see increased blockchain activity and wider adoption to reclaim its previous highs, analysts have said, as the cryptocurrency struggles to break past key resistance levels.

Ether (ETH) has been on a downward trajectory for nearly six weeks, dipping below the psychological $4,000 mark on 16 December 2024. Since then, the world’s second-largest cryptocurrency has fallen by more than 20%, trading at $3,260 at the time of writing, according to Cointelegraph Markets Pro data.

Fundamental Activity Key to Reversing Decline

To recover from its slump and edge towards previous highs, Ethereum needs to bolster its blockchain activity, according to Aurelie Barthere, principal research analyst at Nansen.

“Other layer-1s are catching up with Ethereum regarding apps, use cases, fees and amount staked,” Barthere told.

She believes Ethereum could benefit from greater collaboration with both private and public entities, particularly in the United States, given the recent regulatory momentum in favour of blockchain and cryptocurrency.

Additionally, the Elon Musk-led Department of Government Efficiency (DOGE), a non-governmental agency, could play a role in Ethereum’s adoption. Reports suggest DOGE has explored blockchain-based solutions for expense tracking and financial management. Barthere noted that the agency has been rumoured to have met with public blockchain representatives for potential on-chain financial solutions.

Ethereum’s potential involvement in ventures linked to the Trump family could also fuel its adoption. Joseph Lubin, Ethereum co-founder and founder of Consensys, suggested that the Trump family might be considering an Ethereum-based cryptocurrency business.

Bullish Momentum in Options Trading

Despite Ethereum’s recent struggles, signs of a market recovery have emerged, particularly in the options trading sector. According to a 31 January report by Bybit and Block Scholes, Ether options trading volume has reached its highest levels in over a month.

While this surge does not directly impact ETH’s price, analysts say the increasing number of bullish Ether options contracts suggests traders are positioning for a potential rebound.

“The larger notional value of call option open interest that we have seen throughout January is now once again backed by a bullish skew towards Out of the Money [OTM] calls at volatility smiles across expirations,” a Block Scholes analyst told Cointelegraph.

The option skew refers to the difference in implied volatility between out-of-the-money put and call options in Ether markets, often indicating market sentiment.

Resistance at $3,400 Before Further Gains

Crypto trader Cas Abbé highlighted the need for Ether to reclaim the $3,400 level before attempting another push towards $4,000. In a post on X (formerly Twitter) on 1 February, Abbé noted that ETH is forming a bullish divergence on the daily chart.

“To continue the uptrend, ETH needs a 1D close above $3,400, and the rally towards $4,000 will happen very soon,” he wrote.

However, Ethereum faces significant resistance at this level. CoinGlass data shows that breaking past $3,400 could trigger over $1.09 billion worth of cumulative leveraged short liquidations, potentially fuelling further gains.

Some industry experts anticipate an Ether resurgence in February, driven in part by continued institutional investment from Trump’s World Liberty Financial protocol. If Ethereum can leverage these opportunities and increase its blockchain activity, it may be well-positioned to recapture its former highs.