Ethereum traders shorted ETH price in record numbers during the Merge — 50% crash ahead?

Ethereum efficiently accomplished its long-awaited transition to proof-of-stake through “the Merge” on Sept. 15, whereas merchants have been more and more shorting Ether (ETH) in anticipation of a sell-the-news occasion.  

Ethereum funding fee plumme

Ether’s futures funding rates across leading derivatives platforms dropped under zero—to their worst ranges to this point—earlier than the Merge. The speed dropped to as little as -0.6% on BitMex. 

ETH funding charges historical past. Supply: Coinglass

Funding charges are a proportion of the price paid to both brief or lengthy place holders. The platform decides the price based mostly on the distinction between the perpetual futures contract and the spot value.

Due to this fact, merchants contemplate a market bullish when the funding fee is optimistic. Conversely, a damaging funding fee hints at a bearish sentiment available in the market. Let’s perceive why with an instance.

At the moment, Ether’s funding fee common is round -0.1%. In different phrases, merchants with a $1 million brief ETH place are prepared to pay these with lengthy positions $1,000 each eight hours (based mostly on when platforms recalculate the funding charges).

That exhibits merchants’ conviction in a possible spot Ether value drop after the Merge.

Nevertheless, a constantly damaging funding fee additionally will increase the possibility of a short squeeze. A short squeeze occurs when an asset moves higher and short traders decide to cover their position or get forced to do so via margin calls, thus adding more upside strength to the asset’s price.

ETH price technicals hints at 50% breakdown

From a technical perspective, Ether’s price risks dropping by 50% in the coming weeks due to the formation of a symmetrical triangle on its longer-timeframe chart

Notably, symmetrical triangles are development continuation patterns, i.e., they sometimes immediate the value to proceed within the path of their earlier development after a consolidation interval. So, Ether’s symmetrical triangle sample seems bearish, significantly because it has shaped after the token’s 80% decline from its November 2021 highs.

ETH/USD three-day value chart that includes ‘symmetrical triangle’ setup. Supply: TradingView

Theoretically, a bearish symmetrical triangle’s draw back goal is calculated after subtracting the triangle’s most peak from the breakdown level. That places ETH’s revenue goal in 2022 round $850.

Related articles

Capital rotation into Bitcoin

Along with damaging funding charges and the symmetrical triangle setup, Ether additionally faces draw back dangers from a renewed shopping for curiosity in Bitcoin (BTC), the main cryptocurrency by market capitalization.

On the every day chart, ETH/BTC dropped to 0.078 BTC on Sept. 15, nearly every week after topping out at 0.085 BTC. The pair’s correction got here after a strong bull cycle, whereby its value rose by greater than 75% in lower than three months.

ETH/BTC every day value chart. Supply: TradingView

“ETH’s underperformance forward of the merge signifies that some merchants try and entrance run a possible “sell-the-news” occasion,” noted Arcane Analysis in its weekly report, albeit including:

“Whether or not or not the merge will become a “sell-the-news occasion stays to be seen.”

In one other weekly report, funding administration agency CoinShares reported a considerable decline within the capital of Bitcoin and Ethereum-based funding merchandise.

Associated: Analyst on $17.6K BTC price bottom: Bitcoin ‘not there yet’

Nevertheless, Ether funds witnessed withdrawals value $61.6 million within the week ending Sept. 9 in comparison with Bitcoin’s $13 million.

Extra sell-the-news cues come from a latest rise in Ethereum’s stability throughout all crypto exchanges. Notably, the Trade influx quantity reached a one-month excessive of twenty-two,723.289 ETH (7-day MA).

Ethereum stability on exchanges. Supply: Glassnode

Merchants sometimes improve their cryptocurrency deposits on exchanges once they need to promote their holdings. In different phrases, a rising ETH stability on exchanges will increase draw back dangers.

The views and opinions expressed listed here are solely these of the writer and don’t essentially replicate the views of Each funding and buying and selling transfer includes danger, you must conduct your individual analysis when making a choice.