Ethereum Price Faces Challenges: Can ETH Recover Again?

  • Short positions against the leading alternative cryptocurrency Ethereum have reached their highest level this year on cryptocurrency exchanges.
  • Interestingly, while the value of the coin has fallen, ETH’s social dominance, calculated as a seven-day moving average, has reached its highest level since February.
  • Ethereum’s statistical correlation with Bitcoin caused it to be affected by last week’s liquidity outflow activity.

Ethereum faced bearish pressure and a strong selling wave caused prices to drop; can ETH recover?

Ethereum Price Under Bearish Pressure

Ethereum-ETH

After a significant liquidity outflow on August 17th, short positions against the leading alternative cryptocurrency Ethereum reached their highest level this year on cryptocurrency exchanges.

According to Coinglass data, Ethereum’s funding rates dropped to -0.0273% on August 18th and have remained negative since then.

Interestingly, while the value of the coin has fallen, ETH’s social dominance, calculated as a seven-day moving average, has reached its highest level since February. This indicates an increase in discussions about alternative assets that typically follow an increase in the value of an asset.

On-chain data provider Santiment, expressing the possibility of a price increase, stated:

“The high level of discussion rate and the high level of short positions that will be liquidated can cause a healthy recovery.”

ethereum-short-rate

Increasing Selling Pressure with Low Profitability

Ethereum’s statistical correlation with Bitcoin caused it to be affected by last week’s liquidity outflow activity. Ethereum, trading at $1,643 at the time of writing, has dropped by 10% in the past week according to data.

In a daily chart, ETH holders started to exit their trading positions when prices dropped on August 17th, and subsequently, increasing sales among daily traders caused key momentum indicators to fall to oversold low levels at the time of writing.

For example, ETH’s Relative Strength Index (RSI) and Money Flow Index (MFI) were 32.39 and 24.30 respectively at the time of writing. Similarly, the coin’s On-Balance Volume (OBV) indicator also started to decline on the same day. This indicator, which was 38.2 million at the time of writing, has since experienced a 1% decrease. When an asset’s OBV decreases, it indicates a decrease in buying pressure on the coin.

This situation also indicated a decrease in the asset’s trading volume. This, combined with a price drop, indicated significantly bearish conditions, making it difficult for the price to recover.

As the price of the coin dropped, transactions also became unprofitable. For example, Ethereum’s Market Value to Realized Value (MVRV) ratio dropped from 16.18% on August 16th to 5.23% at the time of writing. Although the ratio remained positive, the decreasing value indicates a continuous decrease in the number of ETH investors making profits when selling.

Similarly, the daily on-chain transaction volume ratio between profitability and loss has decreased in the past few days. At the time of writing, this ratio was 0.75, indicating that the volume of transactions associated with profit was below the volume associated with loss on average.

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Lucien Renard
Lucien Renardhttps://en.coinotag.com/
Lucien Renard is a 24-year-old writer specializing in cryptocurrency analysis and price action. With a focus on technical analysis, Lucien provides valuable insights into market trends and potential opportunities for investors.
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