Ethereum [ETH] has slipped below the $2.8k threshold, a level that previously posed a strong barrier from August to November 2024.
The decline of ETH, along with most other alternative coins, during November was quite disheartening for investors.
From a technical perspective, the support levels of 61.8% and 78.6% on the Fibonacci retracement scale continued to hold firm. However, the market structure on a daily basis was showing a bearish trend, with a slowdown in buying pressure.
A combination of various indicators and the liquidation heatmap has provided some insights into the possible future direction.
An Exploration of the Projected Leverage Ratio and Potential ETH Liquidity Search
The projected leverage ratio (PLR) is derived by dividing the Open Interest on an exchange by its cryptocurrency reserves.
Furthermore, the PLR serves as an indicator of speculative sentiment – a higher PLR indicates that traders are ready to take on more risks, usually signaling favorable market conditions or expectations.
Following a swift price decrease in early February, the upward trend of PLR was halted temporarily, only to show an upward bounce thereafter.
During the recent days, there was a noticeable surge in Open Interest, escalating from $13.3 billion to $14.2 billion. This spike coincided with a price rebound from $2.5k to $2.7k.
Moreover, the last couple of weeks witnessed a significant amount of Ethereum being moved out of exchanges. While this is a positive indication hinting towards accumulation, it alone does not guarantee a shift in price direction.
When assessing the PLR, it is important to note that it is calculated by dividing the OI by the reserves – an increase in OI coupled with a decrease in coin reserves will boost the PLR figure.
Therefore, the interpretation of PLR with regard to speculative expectations should be approached cautiously. Despite this, the short-term bullish outlook based on OI and PLR assessments remains valid.
Considering these factors, the liquidation heatmap provided additional insights. Notably, there was a significant liquidity concentration around the $2.8k mark, stretching from $2,800 to $2,880, thereby establishing it as a critical zone in the near term.
Looking beyond, the subsequent target was at $3.5k, a considerably distant level.
Hence, traders need to remain vigilant regarding a potential swift price surge.
If Ethereum manages to surpass the $2.8k hurdle, given its historical significance as a major resistance, it is likely to spark optimism and a surge in leveraged trades. However, a move towards $2,880 could potentially turn into a bull trap before a bearish reversal takes place.