After rallying to $4,091 leading into the Dencun upgrade, Ether has underperformed over the last month compared to Bitcoin and the broader crypto market, leading traders to doubt whether the altcoin’s downtrend is over.

To put this into context, Bitcoin’s price fell by 18% during the same period, while the total cryptocurrency market capitalization dropped by 16%.

A number of market and technical indicators show that ETH may witness a deeper correction before embarking on a sustained recovery.

The ETH/BTC ratio trended lower in March

Ether is up 8% so far in March but has underperformed Bitcoin as well as other top layer 1 tokens. BTC price has rallied 21% over the last 30 days, while other top-cap layer 1 tokens, such as BNB Chain’s and Solana’s have rallied 44% and 76%, respectively, over the same timeframe.

The ETH/BTC ratio declined throughout March, reaching its lowest since January.

Currently, there are a handful of reasons for ETH’s underperformance in March, including Bitcoin-specific factors in 2024. U.S. spot Bitcoin ETFs have largely been a success since their approval by the Securities and Exchange Commission on Jan. 11. In addition, the upcoming Bitcoin supply halving, which has historically preceded a parabolic uptrend in crypto prices, has added to BTC’s tailwinds.

Moreover, there has been a decline in Ethereum’s network activity (in specific metrics) over the last week. Data from Glassnode shows that daily active addresses on Ethereum have dropped from 622,963 addresses on March 20 to 546,484 on March 26.

Although Ethereum remains the network to beat in the layer 1 sector, Solana has recently captured its market share in this segment in terms of on-chain activity and stablecoin transfer volume.

Ether faces stiff resistance on the upside

Ether’s latest attempt at recovery was rejected by supply congestion from the $3,600 level. This is an indication that this area presents a stubborn barrier in ETH’s recovery path.

The significance of this resistance zone is reinforced by data from IntoTheBlock. Its In/Out of the Money Around Price (IOMAP) model reveals that this area is within the $3,534 and $3,639 price range, where roughly 1.17 million addresses previously bought approximately 4.97 million ETH.

If this resistance level sees a high volume of activity from the sellers in the short term, Ether’s price is expected to sink deeper.

Ether’s bear flag points to a continuation of the downtrend

After reaching a 27-month high of $4,093 on March 12, ETH price pulled back as bears booked profits and the wider crypto market corrected. The price has since recovered to the current price of $3,511

Despite the recovery, a bear flag can be seen on the daily chart, which hints at the continuation of the downtrend.

Ether bulls are counting on support from the flag’s lower boundary at $3,497. A daily candlestick close below this level would signal a bearish breakout from the chart formation, projecting a decline to $3,060. Such a move would represent a 26% descent from the current price.

The relative strength index’s (RSI) position around 50 also indicated that the bears were selling on the latest rally to $3,600.