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The latest trend in Ethereum suggests six vital purchasing points since 2023. This trend was most noticeable on January 12, when a significant price correction occurred, correlating with the approval of spot Bitcoin ETFs and the second-largest liquidation of long positions. Based on a recent analysis, the tail low has been set at $2,450. Should we observe a breach of this price followed by fast recovery, it hints towards an imminent rebound. However, a failure to make a recovery could indicate a substantial shift in sentiment and an increase in downside volatility.
CryptoQuant’s recent analysis has shed light on the fact that extensive futures liquidations have a tendency to result in longer-tailed candlesticks. This suggests decisive buying action from market whales coinciding with the liquidation of long positions. These low points are critical, representing extreme market sentiment. The ramifications of such harsh situations are key to predicting the trend of the price. A flood of liquidated long positions causing downside volatility can impel a drastic shift in market sentiment. Conversely, if the price recovers and rebounds, it can provide reassurance to investors and trigger buying activity. Examining instances from means observed in the months of September-October, November, and December of 2023, a similar pattern becomes evident. Notably, a substantial number of long positions were liquidated in these periods, and any breach of the tail lows temporarily resulted in a market recovery.
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