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Key takeaways<\/strong>:<\/p>\n Ethereum\u2019s market dominance has hit overbought RSI levels not seen since May 2021, historically followed by major pullbacks.<\/p>\n<\/li>\n ETH\/USD is showing a bearish divergence on the four-hour chart, hinting at a potential 10\u201315% price correction.<\/p>\n<\/li>\n Despite the near-term risks, some analysts view a pullback as a \u201cbuy-the-dip\u201d setup before a possible move toward $3,500\u2013$3,800.<\/p>\n<\/li>\n<\/ul>\n Ether (ETH<\/a>) has surged over 50% month-to-date in May, vastly outperforming the broader crypto market\u2019s 15.25% gain. The rally has pushed Ethereum\u2019s market dominance (ETH.D) toward the critical 10% threshold for the first time since March.<\/p>\n But the rising dominance accompanies signs of overheating, indicating that Ethereum bulls should not celebrate the rally just yet.<\/p>\n The strong recovery in Ethereum\u2019s crypto market share has pushed its daily relative strength index (RSI)<\/a> to its most overbought zone since May 2021, raising red flags for traders betting on further upside, at least in the short term. <\/p>\n Historically, such extreme RSI levels on ETH.D have marked the beginning of major pullbacks. One notable instance occurred in early July 2024, when ETH dominance peaked near similar RSI levels. <\/p>\n Over the following 315 days, ETH.D dropped by more than 17.5%. The current RSI spike, again above 80, mimics a similar setup, suggesting that Ethereum could be nearing a local top in its market share.<\/p>\n Adding to the bearish outlook, ETH.D remains below its 200-day exponential moving average (200-day EMA; the blue wave). This resistance level has repeatedly capped Ethereum\u2019s dominance during previous recovery attempts.<\/p>\n Previous overbought pullbacks have initially pushed Ethereum\u2019s market share toward its 50-day EMA (the red wave).<\/p>\n The ETH.D metric, therefore, risks declining toward its current 50-day EMA support at around 8.24% by June, suggesting potential capital rotation out of Ethereum markets to other coins in the coming weeks.<\/p>\n On the four-hour ETH\/USD chart, a classic bearish divergence is emerging, where Ethereum\u2019s price continues to print higher highs, but momentum indicators trend lower. <\/p>\n Crypto trader AlphaBTC<\/a> noted that ETH is showing \u201cthree clear drives of divergence,\u201d a setup often preceding trend exhaustion. He added that key Fibonacci levels align with potential support zones, suggesting a pullback could be imminent.<\/p>\n With ETH hovering near the $2,740 Fibonacci extension, profit-taking pressure may intensify, opening the door for a short-term correction toward lower Fib levels at around $2,330 or even $2,190, down 10%-15% from the current prices.<\/p>\n Independent market analyst Micha\u00ebl van de Poppe suggests<\/a> ETH\u2019s decline in the coming weeks could serve as a \u201cbuy-the-dip opportunity,\u201d indicating that the cryptocurrency would eventually climb over $3,500. <\/p>\n Related: <\/strong><\/em>Altcoins\u2019 roaring returns and falling USDT stablecoin dominance suggest \u2018altseason\u2019 is here<\/strong><\/em><\/a><\/p>\n\n
Ether\u2019s RSI most overextended since May 2021<\/h2>\n
Bearish divergence signals 15% ETH price drop<\/h2>\n