As the dust settles on Tuesday's market tremors, Ethereum (ETH) has found itself in the teeth of a storm, with its price lingering precariously below $3,100. Sentiments are turning bearish on this leading altcoin as signs point towards a potential surge in selling pressure within the exchange ecosystem.
Derivatives and On-Chain Data: The Writing on the Wall for ETH?
Nick Forster, CEO at crypto options exchange Derive, paints a gloomy picture of Ethereum's market sentiment. In his recent report to investors, he notes an unsettling trend: "Ethereum is showing signs of a more negative sentiment brewing, with more calls being sold (27%) and puts bought (34.8%) in comparison to Bitcoin."
In layperson terms, 'calls' and 'puts' are derivatives instruments utilised by options traders to speculate on asset price movements — calling for an increase and putting for a decrease. And if these speculations hold water, ETH may be staring down the barrel of increased volatility.
Forster elaborates that options traders forecast a 68% probability of ETH's price swinging between -19.18% ($2,510) and 23.73% ($3,843). This prediction comes against the backdrop of spiking transaction activity involving large volumes — from 1.66 million ETH on Sunday to over 2.95 million ETH on Monday.
But there's more cause for concern: net outflows from ETH staking over the past five days amount to 188K ETH worth over $580 million. In essence, investors appear to be withdrawing their staked tokens potentially intending to sell them off in exchanges.
This trend isn't restricted to individual investors alone. Ethereum exchange-traded funds (ETFs) reported net outflows of $39.1 million on Monday, per Coinglass data.
ETH Price Forecast: Balancing on the Edge
Ethereum is grappling with a 2% loss following the liquidation of $35.88 million in ETH futures within the last 24 hours. The split between liquidated long and short positions was recorded at $25.32 million and $10.36 million, respectively.
With the 14-day Exponential Moving Average (EMA) providing crucial defence near the psychological level of $3,000, it's apparent that ETH is walking a tightrope after recent consolidation efforts. This precarious position has given life to an inverted head and shoulders pattern on ETH's daily chart.
The implications? If ETH manages to break resistance around $3,400, we could see a rally pushing it up by over 30% towards $4,522 — contingent upon overcoming hurdles at $3,732 and $4,093.
However, as the Relative Strength Index (RSI) trends downwards after hitting its yellow moving average line, it's clear that bullish momentum is losing steam for Ethereum. A daily candlestick close below $2,817 would render this thesis void and send ETH spiralling towards support levels around $2,250.
An Endnote: Questions About Ethereum
Ethereum remains a revolutionary open-source blockchain with smart contract functionality — despite the storm clouds gathering overhead. As developers continue building innovative solutions like decentralized finance (DeFi), GameFi, non-fungible tokens (NFTs), and decentralized autonomous organizations (DAOs) on its platform — the future still holds promise for this top altcoin.
However, the current scenario underscores the importance of understanding and appreciating the volatility inherent in cryptocurrency investments. Navigating this rapidly fluctuating landscape requires a clear-eyed assessment of market trends, backed by meticulous research and reliable data. As Ethereum investors brace for the potential fall, it's crucial to remember that even in the world of crypto — what goes up, must come down.