Ethereum has recently bounced back to around $4,131 after testing lows near $3,900, with technical indicators like the 200-day EMA signaling short-term support, but resistance remains between $4,250 and $4,400.

For a sustained bullish move, ETH needs to break above resistance levels and consolidate, while failure to hold above $4,000 could lead to retests of lower support levels, such as $3,800.

The broader crypto market is recovering, with Bitcoin approaching $112,000 and ETH regaining the $4,000 psychological level, despite being down 17% from its all-time high of $4,953 set a month ago.

Current market dynamics show decreasing exchange reserves without immediate price increases, suggesting that a demand surge is necessary to trigger a significant rally.

Market activity includes over $75 million worth of short positions being liquidated within an hour, indicating increasing bullish sentiment among traders.

Historical patterns reveal that reductions in exchange reserves, combined with demand, have previously led to bullish cycles, especially during high gas fees, macro tailwinds, or crises like the FTX collapse.

CryptoQuant reports a continued decline in Ethereum supply on spot exchanges, implying investors are withdrawing ETH for self-custody or staking, which reduces sell-side liquidity and could support future price rallies.

The next significant resistance level is at $4,200, and a successful break above it could signal further gains in the short term.

Ethereum's price remains above key support levels such as $3,820 and $4,050, and has broken above a bearish trend line at $4,000 on the hourly chart.