Ethereum traders are betting on a “news sell” event on the day of consolidation as ETH’s currency balance rebounds sharply.
As Ethereum successfully completed its long-awaited transition to Proof-of-Stake via “Merge” on September 15th, traders are increasingly disclosing ETH.
Ethereum

way down
$1276

waiting for sales news.

Ethereum Funding Rate Has Dropped
Futures funding rates on the leading Ethereum derivatives platforms fell below zero ahead of the merger, their worst level to date. The rate fell to -0.6% on BitMex.

History of ETH funding rates. Source: coin glass
Funding rates are a percentage of the commission paid to holders of short or long positions. The platform determines the commission based on the difference between the perpetual futures contract and the spot price.

Therefore, traders consider the market to be bullish when the funding rate is positive. Conversely, a negative funding rate indicates a bearish trend in the market. Let’s see why with an example.

Currently, the average Ether funding rate is around -0.1%. In other words, traders holding $1 million short ETH positions are willing to pay $1,000 every eight hours for long positions (depending on when the platforms recalculate their funding rates).

This shows traders’ faith in the potential drop in the spot price of Ether after the merger.

However, a persistently negative funding rate also increases the likelihood of a short squeeze. A short squeeze occurs when an asset is rising and short traders decide to close their positions or are forced to do so with margin calls, thereby increasing the price strength of the asset.

ETH price technical data points to a 50% drop
From a technical standpoint, the Ether price is at risk of falling 50% in the coming weeks as a symmetrical triangle forms on the long-term chart.

In particular, symmetrical triangles are trend continuation patterns, which means that they usually allow the price to continue moving in the direction of the previous trend after a period of consolidation. As such, the ethereum symmetrical triangle is bearish, especially as it formed after the token’s 80% drop from its November 2021 peaks.

A three-day ETH/USD price chart with a symmetrical triangle setup. Source: Trading View
Theoretically, the bearish target of a bearish symmetrical triangle is calculated after subtracting the maximum height of the triangle from the breakout point. So the ETH profit target for 2022 is around $850.

Return of capital in bitcoin
In addition to negative funding rates and a symmetrical triangle setup, Ethereum is also facing downside risks from renewed buying interest in bitcoin.
BTC

way down
$16,952

, the leading cryptocurrency by market cap.

On the daily chart, ETH/BTC fell to 0.078 BTC on September 15, almost a week after hitting 0.085 BTC. The correction of the pair came after a strong bull cycle, when its price rose by more than 75% in less than three months.

Daily ETH/BTC price chart. Source: Trading View
“The poor performance of ETH ahead of the merge indicates that some traders are trying to counter a potential ‘news selling’ event,” Arcane Research said in a weekly report.

It remains to be seen if the merger will be a “news selling event.”
In another weekly report, investment management company CoinShares reported a significant drop in the capitalization of Bitcoin and Ethereum-based investment products.

Related: Analyst on $17.6k BTC Price Drop US: Bitcoin ‘not there yet’

However, in the week ending September 9, $61.6 million was withdrawn in ethereum funds, compared to $13 million in bitcoin.

More news about the sale is due to the recent increase in the balance of Ethereum on all crypto exchanges. It is noteworthy that the volume of entries on the exchange reached a monthly high of 22,723,289 ETH (7-day moving average).

Ethereum balance on exchanges. Source: glassnode
Traders often increase their cryptocurrency holdings on exchanges when they want to sell their holdings. In other words, the growing balance of ETH on exchanges increases downside risks.

The views and opinions expressed here are those of the author only and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, so you should do your own research when making a decision.

AVAILABLE EVERY MONDAY
subscribe to
Market Watch Newsletter

Source: CoinTelegraph

LEAVE A REPLY