Ethereum is following the general sentiment in the market as Bitcoin and other cryptocurrencies make a run towards previous highs. The second cryptocurrency by market cap knocked some gains over today’s trading session but seems poised for a re-test of its lows before moving to the upside.
At the time of writing, Ethereum (ETH) trades at $1,300 with a 2% profit in the last 24 hours and in the last week. Unlike in previous rallies, ETH’s price is lagging larger cryptocurrencies, such as Bitcoin, the number one crypto that records a 4% profit over the same period.
ETH’s price moving sideways on the 4-hour chart. Source: ETHUSDT Tradingview
Ethereum At Critical Point, Will It Finally Breakout?
Today’s bullish price action seems to be prompted by a rebound across legacy financial markets, the S&P 500 and Nasdaq 100 have been trading in the green giving cryptocurrencies room for a run. The bullish price action is leading to a change of sentiment across the digital asset class as investors turned optimistic.
Over the weekend, with traditional markets close, the situation was different and market participants were gearing up for a potential leg down. According to a pseudonym trader, Ethereum saw a spike in Open Interest (OI) against the U.S. dollars.
This increase in OI was recorded as the cryptocurrency trended to the downside. Therefore, the analyst claims that the metrics hinted at a spike in short (sell) positions from traders expecting further downside in the short term.
The liquidity provided by these short positions accumulates to the upside, making each rally stronger and fueling further bullish momentum. However, the analyst believes the market might take this upside liquidity before re-testing support levels. The pseudonym trader wrote the following via his official Twitter account:
I said yesterday that there was a lot of short build up on $ETH. They’re getting squeezed now. Once that’s done it gets slapped back down I think. Looks like a clean short set-up.
Source: Byzantine General via Twitter
In case of potential downside, data from Material Indicators shows that the area between $1,280 and $1,250 has the biggest concentration of bid (buy) liquidity on low timeframes. These levels might provide the bulls with strong support to either resume the bullish momentum or send ETH back into accumulation mode.