Ethereum (CRYPTO: ETH) is down around 30% over the past week, breaking below the $2,000 mark as technical and on-chain signals deteriorate.

Network Activity Signals ‘Overheated' Conditions

CryptoQuant data shows Ethereum's transfer count (14-day SMA) surged to 1.17 million on Jan. 29, a level historically linked to major market turning points.

Similar spikes appeared near the 2018 cycle top and just ahead of the 2021 crash, both of which were followed by steep drawdowns.

While rising activity can reflect growing adoption, parabolic spikes near price highs often signal overheated market conditions, typically associated with profit-taking, distribution, and heightened volatility.

The current setup closely resembles past pre-correction phases, suggesting downside risk remains elevated.

Traders should stay cautious and watch for confirmation before assuming further upside.

Key Support Levels Broken

Crypto trader Nebraskangooner noted that Ethereum has fallen to the 1.337 Fibonacci extension, a critical technical support zone that has triggered a "buy approaching" alert.

If this level holds, ETH could stabilize or consolidate.

If it fails, history suggests price often flushes rapidly toward the next liquidity pocket.

Ted Pillows added that Ethereum is entering a high-liquidity zone, with dense clusters of trend research liquidations between $1,800 and $2,000.

This range is likely to act as a volatility magnet, either pulling price into a liquidity sweep or triggering sharp stop-driven moves as leveraged positions unwind.

Traders are now watching closely for confirmation, with this zone shaping up as a near-term make-or-break area for Ethereum.

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