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Amid the broader market crash, the world’s second-largest cryptocurrency Ethereum (ETH) has entered a major correction. After last week’s fall, the ETH price has been hovering around $2,000 levels.
On-chain data provider Santiment provides us some glimpses into what could be the next price action for Ethereum (ETH). The data provider noted that on an 8-hour chart, there have been heavy shorts building up for Ethereum at $2,000.
However, Santiment adds that this usually doesn’t end well with the shorter and a short squeeze is likely to follow. Thus, we might see a bounce back in the price of Ethereum.
But another concerning factor is the ETH exchange supply. Santiment notes:
While we saw a nice drop in supply on exchanges for the past year or so, May 1st 2022 saw a huge increase in supply on exchanges as folks rushed to exit their positions, which is clearly reflected on the price itself.
Thus, any further increase in the exchange supply would fuel an additional drop. This suggests that investors are in a state of panic and have completely given up. Although the situation looks scary, this could be a good time to build up fresh positions.
Some Positive Indicators for Ethereum
Santiment cites the 90-day MVRV (Market-Value-to-Realized-Value) Ratio for Ethereum. It adds that the MVRV “measures the mid-term profit/loss of holders is showing that we are almost into the opportunity zone, which historically saw a local bottom being developed with a decent R/R”.
On the other hand, global macros will continue to play a big role in deciding the crypto market momentum. Amid persisting inflation, the U.S. equity market and the S&P 500 are showing signs of weakness amid the fear of aggressive interest rate hikes by the Federal Reserve. At the same time, the fears of the United States going into a recession are high.