Ethereum (ETH) price faces risk of short compression amid waning institutional interest

Currently, Ethereum faces a risk of a short squeeze, as represented by the rise in the Estimated Leverage Ratio (ELR), which acts as a crucial indicator of market sentiment.

As the ELR has increased over the past few months, it reflects an increasing number of traders taking highly leveraged short positions.

Ethereum faces risk of short compression

Data from CryptoQuant, as shared by market analyst “ShayanBTC”, suggests that traders are betting on further declines in the price of ETH amid an ongoing bearish outlook. With leverage levels reaching record highs, the futures market appears overheated, putting Ethereum at risk of a short squeeze.

ETH is down over 2% in the last day alone and is currently trading above $2,580. If the price of crypto assets rises unexpectedly, those holding short positions may be forced to buy ETH to cover their losses, leading to a rapid price increase.

The 100-day moving average at $2,700 serves as an important resistance level. As such, a break above this threshold could trigger substantial short selling, further pushing the price of ETH higher.

Decrease in institutional appetite

Meanwhile, the data also points to a decline in institutional appetite for ETH in the US market even though spot Ether ETFs attracted net inflows of $11.94 million on Tuesday, driven mainly by the ETHA fund from BlackRock. Other investment vehicles recorded no flows. According to CryptoQuant analysis shared by analyst “burakkesmeci”, Ethereum’s Coinbase Premium Index has fallen below its 14-day simple moving average (SMA).

This crossover typically indicates increasing selling pressure from US investors, which could lead to price falls in ETH.

Considering the current value, the Coinbase Premium Index is sitting at -0.05062437, while its 14-day simple moving average (SMA 14) is -0.03906392. It’s important to note that Coinbase serves as a preferred platform for institutional investors, and the fact that the current Premium Index is more negative than its SMA potentially indicates that larger players are reducing their exposure to ETH.

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