Ethereum (ETH), the leading smart contract platform, has seen a significant downturn, falling over 45% from its August 2025 all-time high near $4,950 to recent lows around $2,650. While such a drop can unsettle investors, a growing chorus of analysts views this deep correction as a healthy consolidation within a larger bullish cycle, potentially setting the stage for a more powerful upward move.

The sharp decline has wiped out roughly $10 billion in daily volume, which now stands at $50.3 billion, reflecting the heightened uncertainty. However, this price action has brought ETH into a historically significant support zone, a region where buyer interest has previously emerged with conviction.

A Structural Shift: From Wave 4 to a Deeper Wave 2 Retracement

Technical analysts are re-evaluating the market’s structure. Prominent chartist StockTrader_Max recently updated his Elliott Wave count, indicating that ETH’s break into its prior Wave 1 price range has invalidated the earlier Wave 4 correction theory. The current pullback is now classified as a larger Wave 2 retracement.

This is a critical distinction. Wave 2 pullbacks are typically deeper and occur earlier in a new bull cycle, often retracing a significant portion of Wave 1’s gains. As the analyst noted, “ETH is already at the 0.618 FIB… this is an area where I expect to see a low form.” The 0.618 Fibonacci retracement level, a classic support zone in trending markets, sits around $2,748. If this count holds, the subsequent Wave 3—known as the most powerful and extended impulse wave—could project a long-term target as high as $8,800, a substantial increase from previous Wave 5 estimates of $6,000. For a deeper understanding of these technical concepts, Investopedia’s guide on Elliott Wave Theory provides an excellent foundational resource.

Navigating the Key Fibonacci Support Confluence

The chart shared by Bleeding Crypto highlights that ETH isn’t facing a single support line, but a broad zone of confluence. This area encapsulates several key Fibonacci levels:

  • 0.618 at $2,748

  • 0.706 at $2,433

  • 0.786 at $2,147

This price band aligns with a multi-month consolidation range from earlier this year, a region where ETH previously established a strong base. Such areas often act as a springboard for the next significant trend. While the depth of the correction is notable, it remains within the scope of historical cycle pullbacks. For instance, tracking these key levels against broader market sentiment, as often detailed in CoinDesk’s market analysis, can provide a macro perspective on whether this support will hold.

A Final Piece of the Puzzle: The Filled CME Gap

Adding another layer to the technical picture, Ash Crypto pointed out that the recent sell-off has successfully filled a CME futures gap that had remained open for nearly four months, located between $2,850 and $3,000. In market technicals, gaps on futures charts often act as magnetic price targets, and their “filling” is viewed by many traders as resolving a market imbalance. This closure could remove a lingering overhang and contribute to a more stable foundation for a potential rebound.

The Road Ahead: Patience is Key

The current environment tests the resolve of every investor. However, the convergence of a deep Wave 2 retracement, a multi-layered Fibonacci support zone, and a filled CME gap presents a compelling narrative for a potential cycle reset. While short-term volatility may persist, the fundamental drivers for Ethereum—including its dominant role in decentralized finance (DeFi) and the ongoing development tracked by communities on Ethereum.org—remain intact.

The key takeaway for traders is clarity: a hold above the critical $2,150-$2,750 support confluence could validate the bullish Wave 3 thesis. However, a decisive break below this zone would force a major re-evaluation of the current cycle’s strength and trajectory.