As the market responds to the latest cryptocurrency regulations, Ethereum (ETH) is showing warning signs after a technical sell signal appeared for the first time in months, along with a spike in on-chain realized profits.
Ethereum Faces Potential Drop After Key Sell Signal
On Thursday, Ethereum rose 3.5% during the day before hitting its three-day resistance level of $2,320. This move followed progress on the crypto market structure bill, known as the CLARITY Act, which advanced to a full Senate vote after a 15-9 bipartisan vote during the Senate Banking Committee’s long-awaited markup session.
The leading altcoin has been trading sideways between $2,200 and $2,400 over the past month, a range some have called a “no-trade zone.” While many analysts expect a breakout above the upper boundary, analyst Ali Martinez has warned that Ethereum could be heading for a major correction.
In a post on X, Martinez noted that a new sell signal has appeared on ETH’s weekly chart for the first time in nine months. He explained that the TD Sequential indicator has been very accurate in predicting the altcoin’s trends since April 2025, with every weekly signal confirmed by significant price moves over the past year.
In mid-April and mid-June 2025, the indicator gave two buy signals, leading to multi-week rallies of 87% and 134%, respectively. In late August 2025, it gave a sell signal that correctly predicted a 63% drop from its all-time high to the February lows.
Now, the latest weekly signal “suggests Ethereum is entering another corrective phase,” which could push the price to new local lows. If selling pressure increases, Martinez set an initial target of $1,900, with potential mid- and long-term targets of $1,565 and $1,090.
Time to Be Cautious or Bearish?
Blockchain analytics firm Santiment reported that Ethereum realized profits rose to $74.58 million, the highest in three weeks, even as the price fell 5.5% over the past three days. While this might seem “counterintuitive” given the recent drop, it doesn’t necessarily mean investors should turn completely bearish.
According to the firm, holders with a much lower cost basis are taking profits during the mid-May dip. These traders bought in February and March when Ethereum was below $2,000 amid market uncertainty and geopolitical risks. As a result, those who bought during that period are still in profit despite the recent decline and may “have decided to sell while they feel they still have the opportunity to enjoy a profit.”
Meanwhile, on-chain activity volume increased, with 4-hour candles showing notable price compression around the $2,241 level. Santiment noted that more transactions lead to more Profit and Loss (P&L) realization events, and even small individual profits can raise total network volumes.
Based on current Ethereum trader behavior, the firm advised investors not to turn bearish but to “lean cautious” while waiting for clearer signals. “Watch for deeper realized losses as a potential bottoming signal, and don’t position aggressively until the distribution phase shows clear signs of ending,” it concluded.
Featured Image from Unsplash.com, Chart from TradingView.com
Frequently Asked Questions
Here is a list of FAQs about the Ethereum TD Sequential indicator flashing a sell signal and the possibility of a 50 price correction
BeginnerLevel Questions
Q What is the TD Sequential indicator
A Its a technical analysis tool that counts price bars to predict when a trend might be exhausted and is about to reverse It has two phases a setup and a countdown
Q What does it mean when it shows a sell signal
A A sell signal means the indicator thinks the current upward price trend is getting tired and is likely to reverse downward soon Its a warning not a guarantee
Q Does a sell signal from this indicator mean the price will definitely crash 50
A No The indicator only suggests a shortterm pullback or trend reversal is likely A 50 crash is a rare extreme event The signal alone does not predict the size of the drop
Q Should I sell all my Ethereum right now because of this signal
A Not automatically One indicator is not enough to make a major decision Always combine it with other tools before selling
Q How often does the TD Sequential give a sell signal on Ethereum
A Fairly often It can trigger multiple times during a longterm uptrend sometimes signaling a small dip rather than a major crash
IntermediateLevel Questions
Q How reliable is the TD Sequential for predicting a 50 correction like we saw in 2022
A Its not designed to predict the magnitude of a correction Its more reliable for timing shortterm reversals Major 50 crashes usually require fundamental shocks not just a technical indicator
Q Whats the difference between a sell setup and a sell countdown signal
A The setup is the first warning The countdown is a stronger later signal that often coincides with a more significant top A countdown sell is rarer and more powerful