- ETH fell below $2,600 after encountering strong resistance above $2,700.
- This pullback could be a trap that could cause a short squeeze in ETH as leverage spikes.
Ethereum [ETH] This is the third day of bearish retracement after encountering resistance above $2,700. However, there is speculation that the decline will be short-lived.
Recent CryptoQuant analysis suggests that ETH short positions have surged above the $2,700 price level.
This confirmed that many were expecting a retracement due to previous resistance at this price level. Selling pressure is currently outweighing demand, with the price rising to $2,584 at the time of writing.
The analysis warned that a surge in shorts and desire for leverage could expose ETH to a short squeeze scenario.
Ethereum’s open interest has been rising since September 6th. This shows renewed interest in the derivatives sector.
More importantly, ETH's estimated leverage ratio has recently increased to levels last seen in early July.
Source CryptoQuant
A surge in over-leveraged short selling could highlight the fertile ground for whales to push prices up and shake things up. But what is the probability that this will happen?
Evaluate ETH demand and establish a short squeeze
The biggest sign that a short squeeze is coming is when whales start accumulating aggressively.
According to IntoTheBlock statistics, ETH flowing into large holder addresses increased from 194,280 coins on October 19th to 335,870 coins on October 22nd.
This confirmed that large holders are accumulating more ETH as the price falls.
Source: Into the Block
On the other hand, the outflow amount of large holders increased from 122,380 ETH on the 20th at 0ct0ber to 267,180 ETH on October 22nd.
This means that Ethereum sales slightly exceeded net purchases, which is consistent with the bearish price trend over the same period.
Despite the bears having the upper hand, large holders bought more coins than they sold. In the past 24 hours, they purchased 68,690 ETH, worth over $177 million.
Data suggests efforts by whales to push prices up may already have begun.
read ethereum [ETH] Price prediction for 2024-2025
This means the coin could be in for an interesting second half of the week, potentially marked by another rally and an attempt to break out of the latest resistance zone.
Ethereum is prone to volatile situations, with rising levels of open interest and desire for leverage.
