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.
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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.
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