ETHEREUM AT $2,450: EXPECTING REBOUND OR VOLATILITY?

Ethereum has witnessed six notable buying opportunities since 2023, with a major liquidation of long positions occurring on January 12, coinciding with the approval of spot Bitcoin ETFs and resulting in a significant price correction.

Recent analysis reveals that the liquidation of long positions has established a key support level at $2,450. If this price level is breached but quickly recovers, it could signal an imminent rebound. Conversely, a failure to recover may indicate a shift in market sentiment and the potential for increased downside volatility.

Critical Point for Ethereum

According to CryptoQuant’s analysis, significant futures liquidations often lead to longer-tailed candlesticks, signifying substantial buying activity by market whales coinciding with long position liquidations.

The low point of these candlesticks holds significance as it represents extreme market sentiment. The aftermath of such extreme situations plays a vital role in determining the price trend. If a cascade of liquidated long positions leads to downside volatility and a shift in sentiment, it can result in a sharp price decline. However, if the price holds and rebounds quickly, it can reassure investors and lead to renewed buying activity.

Historical Patterns

Analyzing specific instances in September-October, November, and December 2023 reveals a pattern. In each case, substantial long positions were liquidated, and temporarily breaking below the tail lows resulted in a bounce-back in the market.

“The tail low of the recent mass long position liquidation is $2.45k, so if we break that price and recover right away, we’re likely to see a bounce, and if we break it, we’re likely to see a shift in sentiment and downside volatility.”

Ethereum’s Current Status

As of now, Ethereum is trading above $2,515, experiencing a slight 1.19% decline over the past day. The supply of Ethereum on crypto exchanges has been steadily decreasing and approaching an all-time low, indicating optimistic sentiment among investors.

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