Ethereum (ETH) bounced back above $3,000 on Tuesday morning after a rough stretch, and at least one prominent Wall Street analyst thinks the worst might be over. Tom Lee from Fundstrat went on CNBC Monday to make the case that Ethereum is "pretty close to bottoming this week."

Multiple Signals Point To A Potential Bottom

Lee's bullish take isn't just hopeful speculation. He pointed to several concrete indicators that suggest Ethereum might be finding a floor despite the recent volatility that's shaken crypto markets.

The long-term story for Ethereum remains solid, according to Lee. He highlighted ongoing developments like stablecoin creation, BlackRock's efforts to tokenize traditional assets, and Wall Street's broader interest in bringing stocks, bonds, and real estate onto blockchain infrastructure. In Lee's view, Ethereum stands out as the only "neutral, 100% uptime blockchain" with the technical capability to support this institutional shift.

But the interesting part is how Lee identifies potential bottoms. He focused on two key metrics that have historically signaled when Ethereum hits structural support levels.

The first is the ratio between ETH's market capitalization and the total value of assets locked on the Ethereum network. Lee noted that Ethereum typically bottoms when this ratio hits around 50%, and current readings are hovering near that threshold. Think of it as a valuation floor based on the actual economic activity happening on the blockchain.

The second indicator involves Ethereum's price relationship with Bitcoin (BTC). Lee cited an ETH-BTC ratio of 0.032 compared to an eight-year historical average that implies a theoretical Ethereum valuation near $12,000. His argument is straightforward: Ethereum looks undervalued and is actually gaining relative strength against Bitcoin so far this year.

The Technical Picture Remains Challenging

While Lee's fundamental case sounds compelling, the chart tells a more complicated story. Ethereum has been stuck below a descending trendline that's rejected every rally attempt since mid-October.

Traders keep trying to push ETH into the $3,350 to $3,500 zone, but each attempt has failed. The result is a textbook pattern of lower highs that signals controlled selling pressure. The market keeps responding to what technical analysts call "trendline memory," where sellers consistently defend the same resistance level.

The moving averages paint a bearish picture across multiple timeframes. The 20-day exponential moving average sits near $3,397 and has capped every bounce. Above that, the 50-day EMA at $3,705 and the 100-day EMA at $3,782 reinforce the medium-term weakness. Even the 200-day EMA at $3,564 has started to flatten, showing that the broader uptrend is losing momentum.

The Parabolic SAR indicator continues printing above price action, confirming the downtrend. Rather than a sharp collapse, ETH has been sliding lower in a slow, grinding pattern that suggests persistent selling without panic.

Exchange Data Shows Continued Distribution

Spot exchange flow data from Coinglass reveals that Ethereum has faced persistent outflows throughout the fall. While the most recent reading showed a modest $30.17 million inflow, the broader pattern remains decidedly negative.

Outflows typically signal that liquidity is leaving exchanges, which can be bullish if it means holders are moving coins to cold storage for the long term. But the lack of strong inflow surges has prevented any sustained rebound, suggesting the outflows might reflect distribution rather than accumulation.

Buyers have tried defending the $3,000 psychological level, but order flow imbalances continue favoring sellers. That's not exactly the backdrop you want when trying to build a sustainable rally.

Critical Support Zone Ahead

The most important near-term battleground sits between $2,950 and $2,880. This support band acted as a strong accumulation zone during the summer months, but it's now being tested under much weaker market conditions.

If Ethereum closes below $2,880 on a daily basis, technical analysts expect the next leg down could target $2,750, followed by $2,620. That lower level aligns with July's consolidation range and would represent a significant retracement from recent highs.

On the flip side, bulls need to see a clean break above the descending trendline and a daily close above $3,350 to change the narrative. Without that shift in momentum, every rally should be viewed as a counter-trend bounce rather than the start of a genuine reversal.

So is Tom Lee right about Ethereum bottoming this week? The fundamental case he laid out has merit, especially the on-chain value metrics and institutional adoption trends. But the technical structure and flow data suggest the market hasn't finished working through this correction yet. The next few days around that $2,880 to $2,950 support zone will likely tell us which story wins out.