Ethereum is setting up for a potential rally toward $2,060 after bouncing off a key support level at $1,850, according to analyst Ali Martinez. ETH currently trades near $1,862, down just under 2% in the last day but maintaining gains over the past week and month.

Martinez’s recent analysis shows that Ethereum remains within a rising price channel on the one-hour chart, having tested and held the lower boundary around $1,850. This level is key to preserving the bullish momentum. If buyers continue to defend this floor, ETH could climb back to the channel's ceiling near $2,060. However, slipping below $1,850 could trigger a shift toward further losses and weaken the short-term uptrend.

The technical outlook is supported by on-chain metrics revealing a continued drop in Ethereum reserves on exchanges. CryptoQuant data highlights that Gemini and Bitfinex have seen about 658,600 ETH leave their platforms since April and May, equating to roughly $1.24 billion at current prices. Gemini's ETH holdings are now at their lowest since March 2024, while Bitfinex also shows a sharp decline. Binance’s balance remains relatively stable near 3.8 million ETH. Reduced exchange reserves often mean fewer coins are available to sell, tightening supply, though this alone doesn't guarantee price increases.

Meanwhile, Ethereum’s derivatives market signals growing bullish sentiment without overheating. Arab Chain reports that the 30-day moving average of Binance’s ETH perpetual funding rate rose to 0.00339, the highest in six months. Positive funding rates indicate traders are willing to pay to keep long positions open, reflecting confidence in upward price movement. Despite this rise, funding levels remain below historical peaks that typically warn of market excess.

Combining these factors steady support at $1,850, shrinking exchange reserves, and rising but controlled funding rates Ethereum looks poised for a notable move higher. This technical scenario contrasts with Bitcoin’s recent sideways action near $67,000, where holders continue to keep coins off the market, creating a different supply dynamic.