ETH/USD Daily Chart (Bitstamp) – Source: TradingView

If the price bounces off this mark, it is highly likely that we will get a strong leg up toward $5,000 in the near term.

The Relative Strength Index (RSI) in the daily chart is approaching oversold territory, meaning that the downturn could start to lose steam if buyers step in to scoop up ETH at this much lower price.

Grabbing ETH at $4,000 offers a 20% upside potential in the near term if we do get a strong comeback to $5K.

Meanwhile, a drop below the $3,900 mark means a bearish trend line breakout that could risk a much more dramatic drop to $3,400 at least. This means a 15% downside risk. The risk-to-reward ratio of this trade is appealing at the time, especially if investors get their hands on ETH below $3,900.

Trading volumes have spiked and have exceeded the 14-day moving average by nearly three times, underscoring the strength of the selling pressure.

A move below $3.9K could mark the end of this latest leg up, but with so many catalysts favoring a bullish outlook for cryptos, it is highly unlikely that this will be the highest that ETH, and altcoins for that matter, will go during this cycle.

Despite the drop, market conditions continue to favor a bullish outlook for cryptocurrencies after the Federal Reserve cut rates for the first time this year. Meanwhile, altcoin season was just getting started as BNB Coin (BNB) surged to $1,000 while ETH made a new all-time high.

It seems highly unlikely that ETH has hit a cycle top already. Ethereum spot ETF inflows show that investors have not panicked despite the latest downturn, as they have only withdrawn $296 million out of these products this week.

This shows long-term commitment from investors, especially at a point when ETH is dropping below such a key marker.