Ethereum is currently in a corrective phase, forming Intermediate Wave 4. On the higher degree, this move takes place within Primary Wave 5 and Cycle Wave 3. At the Minor degree, it becomes clear that this Wave 4 correction is taking shape as a more complex structure, which is consistent with the broader correlation across altcoins. First, a ZigZag pattern unfolded as Wave W, followed by a Flat structure as Wave Y. For Wave Z, either another Flat or a Triangle is expected. The alternative scenario suggests that Wave Y’s Flat has not yet fully completed and may extend lower. While the subsequent Wave X would likely reach a similar target due to fundamental market mechanics, the following Wave Z could theoretically extend deeper, approaching the golden ratio retracement of Wave 4.
From a liquidity perspective, the order book shows relatively few orders below the current price. Instead, a growing concentration of orders can be observed above the top of Intermediate Wave 3, which are likely to be taken out during the upcoming Intermediate Wave 5. The liquidity heatmap confirms significant liquidity above current levels, concentrated in the fair value gap (FVG) zone, which is expected to be targeted during Wave X. Both the clustered orders and liquidity are highlighted in the chart with the red box. Additionally, the volume profile of the prior Intermediate Wave 3 reinforces the likelihood that Wave Y has ended, as price is currently reacting around the point of control (POC), a logical area for a bounce.
Derivative data also supports the potential end of Wave Y. Funding rates have turned back to positive after a period in negative territory, suggesting traders are reducing short exposure and gradually positioning for higher prices. Open interest has also seen a modest uptick, which will likely expand further as Wave X progresses.
In summary, my bias remains bearish, and I will be positioning short at the top of Wave X. Furthermore, I expect Wave Z to take the form of a Flat rather than a Triangle.
