Ethereum Watch

• ETH short positions have climbed to their highest level this year.
• Non-stop distribution amongst daily traders puts the coin at risk of further decline. 

Short positions opened against leading altcoin Ethereum [ETH] across cryptocurrency exchanges reached their highest level so far this year, a day after the significant liquidity exit of 17 August. 

How much are 1,10,100 ETHs worth today?

According to data from Coinglass, Ethereum’s funding rates plummeted to -0.0273% on 18 August and have since been negative. 

Interestingly, while the coin’s value declined, ETH’s social dominance, observed on a seven-day moving average, rallied to its highest point since February. This showed a spike in discussion around the alt, often preceding a jump in an asset’s value.

Opining on the possibility of a price uptick, on-chain data provider Santiment noted:

“The spiked discussion rate & high level of shorts to be liquidated could cause a healthy rebound.”

🧐 #Ethereum #FUD is quite high, as slumping prices have caused the jaded crowd to bet against the #2 market cap #crypto asset. However, for patient #hodlers, the spiked discussion rate & high level of shorts to be liquidated could cause a healthy rebound. https://t.co/y1gEszs6WL pic.twitter.com/gegn3cdEcY

— Santiment (@santimentfeed) August 22, 2023

But is the coin currently set up for this to occur?

Increased sell-off amid low profitability

Ethereum’s statistically positive correlation with Bitcoin [BTC] caused its value to be affected by last week’s deleveraging event. Trading at $1,643 at press time, the price per Ether coin dropped by 10% in the last week, according to data from CoinMarketCap.

On a daily chart, ETH holders began to exit trading positions when prices fell on 17 August—increased sell-offs amongst daily traders since caused key momentum indicators to plummet to oversold lows at press time.

For example, ETH’s Relative Strength Index (RSI) and its Money Flow Index (MFI) were 26.10 and 15.07, respectively, at the time of writing.

Likewise, the coin’s On-Balance Volume (OBV) began its descent on the same day. At 24.03 million at press time, it has since fallen by 1%. When an asset’s OBV declines, it indicates that the buying pressure on the coin is decreasing.

It also signaled a decline in the asset’s trading volume. This, coupled with a price decline, as is the case here, suggested significant bearish conditions, making it difficult for the price to rebound.

As the alt’s price fell, its transactions also became less profitable. For example, ETH’s Market Value to Realized Value (MVRV) ratio dropped from 16.18% on 16 August to 5.23% at press time.

Realistic or not, here’s ETH’s market cap in USDT terms

Although the ratio remained positive, the plummeting value showed a constant decrease in the number of ETH investors that recorded profits when they sold their coins. 

Likewise, the coin’s ratio of daily on-chain transaction volume in profit to loss dwindled in the past few days. At 0.75 at press time, this showed that, on average, the transaction volume associated with profits is lower than that associated with losses. 

Source