During the past couple of weeks, Ethereum [ETH] has witnessed considerable price fluctuations. The value of ETH has decreased from $4109 to $3219 during this timeframe, leading to a period of sideways trading for the altcoin.
This recent market behavior has sparked discussions among analysts regarding Ethereum’s projected performance in the coming years. Notably, Cryptoquant analyst Sun Moon has forecasted a solid performance for ETH in the first quarter of 2025, citing a stable market as a contributing factor.
Decline in Long Positions Held by Ethereum’s Liquidity Providers
Reports from CryptoQuant indicate that liquidity providers supporting Ethereum have decreased their long positions. When entities and traders supplying capital to ETH reduce their long positions, it signals a shift in market sentiment.
A reduction in exposure by liquidity providers might lead to challenges in maintaining a bullish trend without fresh buying pressure entering the market.
The analyst also highlighted that despite the change in sentiment, there has been a decline in Ethereum’s long liquidations. This decrease in widespread liquidations suggests an increasing stability in the market, making it less susceptible to significant sell-offs triggered by market corrections.
Looking ahead to 2025, ETH appears to be following a pattern similar to the previous year. In December 2023, ETH prices surged from $2045 to $2448, corrected to $2259 by year-end, and then started 2024 with a spike from $2281 to $2717, followed by a consolidation phase before rising sharply to $4090.
If this historical pattern holds true, Ethereum is poised for a significant upswing in prices. As per the analyst’s predictions, ETH’s value is expected to experience a substantial increase in the first quarter of 2025.
Implications for Ethereum
Despite the reduction in long positions by Ethereum’s liquidity providers, the demand for long positions remains strong amid active speculative trading.
According to CryptoCrypto’s analysis, Ethereum is currently part of a market driven by leverage.
One key indicator of this trend is the continuous rise in the estimated leverage ratio over the past month, moving from 0.4 to 0.56. This surge signifies elevated market speculation, where investors are increasingly utilizing borrowed funds to maximize potential profits and losses.
Furthermore, the consistently positive Binance Funding Rate over the recent month indicates traders’ anticipation of price increases despite liquidity providers scaling back their investments. This suggests a persistent demand for long positions and bullish sentiment surrounding Ethereum.
Ethereum’s Trajectory in 2025
In essence, although liquidity providers are reducing their positions, the heightened demand for long positions indicates ongoing bullish sentiment and robust speculative activity in the market.
While speculative market practices can lead to price drops, they can also drive short-term price surges.
As Ethereum progresses into 2025, a focus on strengthening its fundamentals and reducing reliance on speculative trading is crucial to mitigate potential corrections.
With continued high demand for long positions, Ethereum is entering 2025 with an optimistic outlook, indicating a bullish market sentiment moving forward.
If this positive sentiment persists, ETH is likely to break out of the $3500 consolidation range and challenge the $4000 resistance level. However, a burst of the speculation bubble could see ETH dropping below $3000.