In Ethereum, six major buying points have emerged since ’23, with the second largest liquidation of long positions occurring on January 12, coinciding with the approval of the spot Bitcoin ETFs and triggering a significant price correction.
Based on a recent examination, the liquidation of long positions has set a tail low at $2,450. A breach of this price followed by a swift recovery might suggest an imminent rebound. In contrast, an inability to recover may suggest a change in sentiment and a rise in downside volatility.
Critical Inflection Point for Ethereum
According to the latest analysis by CryptoQuant, large futures liquidations often result in longer-tailed candlesticks. This is indicative of substantial buying activity from market whales simultaneously with the liquidation of long positions.
The low point of these candlesticks becomes crucial, representing extreme market sentiment, as per the findings of analyst ‘MAC_D.’
The aftermath of such extreme situations becomes important in determining the direction of the price trend. A cascade of liquidated long positions causing downside volatility can prompt a sharp shift in market sentiment. On the contrary, if the price holds and rebounds, it reassures investors and prompts a return to buying activity.
Examining specific instances in September-October, November, and December ’23 reveals a pattern. In each case, substantial long positions were liquidated, and breaking the tail lows momentarily resulted in a market bounce-back.
“The tail low of the recent mass long position liquidation is $2.45k, so if we break that price and recover right away, we’re likely to see a bounce, and if we break it, we’re likely to see a shift in sentiment and downside volatility.”
Ethereum Bulls Prevail
Ethereum was currently trading above $2,515 after a slight decline of 1.19% over the past day.
The supply of the leading altcoin on crypto exchanges has been on a steady decline and was approaching an all-time low, suggesting an optimistic outlook by investors.
Moreover, Ethereum’s market dominance over Bitcoin also saw a significant uptick, with the metric recording a surge of 22.4% over the past week alone.
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