How Perfect Short Squeeze Could Launch Ethereum Price to $3,000

Highlights

Ethereum price bows to selling pressure as long positions liquidations explode.
Rapid increase in ETH open interest as funding rate slumps signals short squeeze ahead of reversal.
Declining network growth implies slowing demand for Ether.
A potential bear flag pattern could extend the correction by 17% if validated.

Ethereum price was not spared by a gust of headwinds that swept across the crypto market on Tuesdays. Crypto prices generally dropped by 3.3% in 24 hours, with the market cap at $2.27 trillion. The largest crypto, Bitcoin, plunged below $62,000 despite Nasdaq filing with the SEC for approval to offer BTC index options.

Ethereum Price Market Movers: Strong Derivatives, Slowing Network Growth, Ether ETFs Persistent Drop

Ethereum price exchanged at $2,571 during US business hours amid calls for an immediate reversal toward $3,000. Derivatives analysis reveals strong fundamentals behind ETH price, starting with Coinglass data on open interest.
A subsequent uptrend in the futures volume to $26.46 billion adds credence to the bullish outlook unfazed by the rapid price drop. According to crypto analysts and trader Adam, the uptick in OI and the funding rate drop indicates perps shorting and directional positioning. At the same time, the CVD divergence amid the downtrend signals an influx of market sell orders. All these factors considered, Ethereum price could be gearing up for a robust short-squeeze, leading to a major run to $3,000.

ETH is setting up for one of the cleanest short-squeeze trades I have seen in a while.

So once the level hits or we start to see some sort of strength/mean-reversion, make sure to long Solana or anything else that actually goes up. pic.twitter.com/xX3Rhz4NAq

— adam (@abetrade) August 27, 2024

However, the number of new Ethereum users has dropped to 68.2k addresses matching levels last seen in November 2023, according to Santiment. This is particularly concerning considering a spike to approximately 197k new addresses in May 2024. A persistent decline in this metric means that demand for Ethereum is reducing and, in the process, depriving ETH price of the momentum to sustain an uptrend.

Ethereum price — Ethereum network growth

Ethereum ETFs posted another net outflow on Monday, summing to $13,23 million. Per SoSoValue data, the products allowing investors to seek exposure to ETH on stock exchanges have since August 15 recorded net outflows signaling negative sentiment and the lack of confidence in the market.

ETH Price Analysis: Can Bulls Come Out On Top?

Ethereum price bulls seem to be battling a losing short-term battle, considering the formation of a bear flag pattern in the daily range. On the upside, the asset could face resistance at the 20-day Exponential Moving Average (EMA) at $2,700, the $50-day EMA at $2,890, and the 200-day EMA at $3,021.

The Relative Strength Index (RSI) retracement in the neutral region heading toward the oversold area affirms the sellers’ grip on Ethereum price. A 17% drop from the current market value will be anticipated if the flag pattern is validated by ETH breaking the channel’s support. In that case, ETH may retest early August support at $2,100.

Nevertheless, Ethereum price forecast suggests that short-term support at $2,500 and the channel’s support could immediately annihilate the continued correction chances. An increase in short positions could also create a perfect squeeze, guiding Ether price to $3,000 and higher.

Frequently Asked Questions (FAQs)

1. Why did Ethereum price drop?

Ethereum price slide to $2,500 support occurred in tandem with a general crypto market downturn.

2. Which levels should traders watch this week?

Traders must pay attention to $2,500 and $2,100 support levels, as well as $2,700 and $2800 resistance areas.

3. What should we do if Ethereum plunges to $2,100?

It would be wise to buy more ETH if the price drops to $2,100, as dips may prove profitable.

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John Isige

John is a seasoned crypto expert, renowned for his in-depth analysis and accurate price predictions in the digital asset market. As the Price Prediction Editor for Market Content at CoinGape Media, he is dedicated to delivering valuable insights on price trends and market forecasts. With his extensive experience in the crypto sphere, John has honed his skills in understanding on-chain data analytics, Non-Fungible Tokens (NFTs), Decentralized Finance (DeFi), Centralized Finance (CeFi), and the dynamic metaverse landscape. Through his steadfast reporting, John keeps his audience informed and equipped to navigate the ever-changing crypto market.

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