Will Ethereum's potential short help ETH out of the $1.5k trap?
Ethereum [ETH] has seen a massive drop below the $1,600 region against the US dollar. ETH has even dipped below $1,500 by press time on CoinMarketCap. Now, any bounce above $1.5k could face obstacles but again, a break above this level remains a possibility.
Rise in the midst of a storm
The biggest altcoins are, at the time of writing, trading around the $1.45k mark after suffering a fresh 3% correction. Here, ETH & nbsp; failed to accelerate above the $1,660 and $1,675 resistance levels. But a bullish possibility is still afoot as the market is short-lived.
Interestingly, Ethereum funding rate has dropped to its lowest value in 14 months, which could pave the way for a short-term market squeeze. CryptoQuant's post by a crypto analyst highlighted the bullish selling story.
Source: CryptoQuant
As seen above, ETH funding rate is lowest since July 2021, lowest value in 14 months. A negative value denotes that short-term traders paid a premium to long-term traders to hold their positions.
Well, the “funding rate” is an indicator of how much recurring fees traders in the Ethereum futures market are exchanging with each other. Notably, this fall (despite the downtrend) could give ETH a potential boost. The last time Funding Ratio was this negative, “it was in July 21 just before a massive drop in Bitcoin & Ethereum,” the blog post added.
A short squeeze occurs when the price of an asset rises sharply as many short sellers are forced out of their positions.
Similarly, ETH can see prices rise while the market is still over-average and liquidated a large number of shorts This liquidation pushed the price even higher, resulting in many shorts being discounted.
When short sellers close their positions, the stratification effect of long orders takes place. Therefore, a short squeeze is often accompanied by a similar spike in trading volume. This is exactly the case that can be seen in the trading volume of ETH on Santiment.
In just 24 hours, ETH has seen trading volume (interested buyers jump in) increase by more than 26 billion.
Also, frequent sentiment from dominant buyers or whales also plays a huge role in the same sector.
One thing leads to another
Needless to say, such continued attention has indeed resulted in some unprecedented traction/demand for the flagship token.
Especially, now before the much talked about Merger time. According to OKLink, the amount of ETH burned in Ethereum has exceeded 2.6 million, which is about $3.76 billion at current prices.
Interestingly, since the implementation of EIP-1559, Ethereum's annual inflation rate has decreased by 50.77%
Aug 30, 2022
