For the last couple of weeks, Ethereum [ETH] has been trading within the range of $2.5K and $2.7K, with traders witnessing a fierce battle between the bulls and bears trying to gain control of the market.
However, in the recent day, this conflict has intensified significantly, culminating in a historic spike in short positions for Ethereum.
Historic High of $11.3 Billion in Short Positions for Ethereum
Within a single day, a staggering $11.3 billion worth of short positions were initiated for Ethereum, setting a new record in the cryptocurrency’s history.
Such a substantial increase in short positions indicates a prevailing bearish sentiment among traders, with a strong expectation of price decline.
Notably, an influx of short positions typically exerts significant downward pressure on prices as selling activity outweighs buying interest in the market.
This dominance by sellers is further substantiated by a notable surge in order imbalance favoring sellers, illustrated by a bearish crossover on the order imbalance chart denoting a surplus of sell orders over buy orders.
In the event of a price drop in ETH, the accumulation of more short positions could drive further downward movement.
What this Development Means for ETH
Despite the surge in short positions as Ethereum’s price started to dip, there was a rapid recovery from $2604 to $2670, followed by a spike to $2698.
This sudden upward reversal suggests that following the opening of numerous short positions, Ethereum encountered a short squeeze.
Consequently, these shorts were squeezed out, leading to a strengthening of prices on the upside. As a result, the market sentiments in the short term appear optimistic, with Futures market re-entering the scene.
Furthermore, the recovery and shift to positive territory in Ethereum’s Futures basis indicate a bullish stance among traders expecting higher prices in the future.
This positive outlook is reinforced by the reversal of the Funding Rate (OI weighted) from negative to positive values, hinting at investors’ willingness to pay a premium to maintain their positions, reflecting a bullish sentiment in the market.
Overall, despite the surge in record short positions, the bears have been unable to seize control of the market, leading to ETH trading sideways as neither bulls nor bears demonstrate sufficient strength to establish dominance.
If the moderate gains witnessed on daily charts persist, Ethereum will likely aim for a move towards $2723. However, the presence of sellers could prompt a retreat, potentially pushing ETH back to $2.6k.