After facing resistance above $2700, Ethereum [ETH] saw a three-day bearish retracement. However, there is speculation that this downtrend may not last long.
An analysis by CryptoQuant indicated a significant increase in short positions for ETH above the $2,700 mark.
This development validated the expected pullback due to previous price resistance. Currently, selling pressure has surpassed demand, leading to a price drop to $2584 at the time of writing.
The analysis cautioned about the surge in short positions and the growing interest in leverage, which could potentially trigger a short squeeze scenario for ETH.
Since September 6th, Ethereum’s Open Interest has been on the rise, signaling a renewed interest in the derivatives market.
Notably, ETH’s estimated leverage ratio recently reached levels not seen since early July.
An increase in excessively leveraged short positions could create an advantageous situation for influential holders to disrupt the market dynamics by increasing prices. But what are the chances of this occurrence?
Evaluating ETH Demand as a Prelude to a Short Squeeze Opportunity
A key indicator of a forthcoming short squeeze would be if major holders began accumulating assets aggressively.
Based on data from IntoTheBlock, the inflow of ETH into large addresses surged from 194,280 coins on October 19th to 335,870 coins on October 22nd.
This surge highlighted the accumulation by significant holders during the price decline.
In contrast, outflows from large holders increased from 122,380 ETH on October 20th to 267,180 ETH on October 22nd.
This indicated that the amount of ETH sold slightly exceeded the net purchases, aligning with the bearish market trend during the same period.
Despite bearish sentiment prevailing, major holders acquired more ETH than they offloaded. In the past 24 hours alone, they purchased 68,690 ETH, valued at over $177 million.
This data implies that influential holders might be initiating moves to drive ETH prices upward.
These developments hint at a potentially eventful latter part of the week for Ethereum, potentially marked by a resurgence and an effort to surpass the current resistance levels.
Ethereum remains susceptible to market volatility, with increasing Open Interest levels and growing appetite for leverage.