Ethereum: Short positions at record level

Ethereum short positions at record level – ETH seems weakened

Ethereum (ETH) has come under pressure on the crypto exchanges: On Tuesday morning (CET), the second largest cryptocurrency suffered a daily loss of around three percent compared to the previous day. Meanwhile, short positions on ETH have reached a record high.

The cryptocurrency analytics platform Coinglass recorded dozens of million-dollar futures and margins liquidations yesterday in the course of the price movements in the broader crypto market. According to Coinglass, more than $300 million in leveraged futures positions were liquidated within a 24-hour period, and more than 95 percent of these losses came from long positions. This fact suggests that it was professional investors trying to bet on a rising price for Ethereum and others, who had to abandon their strategies due to a lack of liquidity. This loss trend continues today with around $30 million to be written off so far.

An analysis of data from the financial intermediary Bitfinex by the Bitcoin trading platform Decentrader sheds light on why Ethereum is currently on a negative trend: Short positions on ETH (bets on falling prices) have reached a record high and continue to rise.

Decentrader CEO Filbfilb told his followers on X (formerly Twitter) that the share of short selling on ETH has never been as high as now in historical comparison. Conversely, this means that if Ethereum unexpectedly gains momentum, the situation could change drastically, since short sellers would have to buy back their positions to avoid further losses. In the crypto world, this cascading development is known as a short squeeze; discussions about whether a short squeeze could also occur influenced Ethereum’s price development in the first place.

Market experts also point to the fact that Ethereum’s trading volume has decreased noticeably since last week. This confirmed the fundamental weakness and was exacerbated by the prevailing negative sentiment. Market observers interpret Ethereum’s negative impression as one of the main causes that keeps dragging down Bitcoin and other cryptocurrencies.

The Omicron variant of the coronavirus prompts raised uncertainty worldwide, adding to hesitant crypto markets. Furthermore, topics regarding regulation linked to blockchain technology play a significant role. While the US government under President Joe Biden voices concerns about digital assets, they are simultaneously exploring central digital currencies. This results in a situation where trust in decentralized cryptocurrencies is muted, and this is visibly reflected in Ethereum’s price.

For mid-December, there is currently speculation about the outcome of the upcoming US Federal Reserve interest rate decision. While a clear stance on raising interest rates is unlikely, the mere hint of a rate increase could have further negative impacts on the crypto market. The alignment of these interest rate speculation factors with the trend for ETH seems to build a rather poor outlook for the short term at least.

However, Ethereum is not just in the headlines for pulling the market in negativity. The planned transition to Ethereum 2.0, set for mid-2022, could see ETH breaking new ground by quite literally turning the blockchain upside down. Ethereum’s large developer community is working feverishly on this, and the market is waiting with anticipation to see if this evolution can lead to long-term positive sentiment and influence.

Until then, however, fears of a significant market correction remain, given the current dejection in Ethereum prices. Not only leveraged traders who are currently suffering losses, but also cautious investors are wondering if the tide for Ethereum will turn again.