Ethereum has shown its mettle in the volatile cryptocurrency market with a strong and sustained upward trend. At the time of this writing, the price of ETH is hovering around $3,743 and is above its moving average with significant bullish momentum.
Now, the cryptocurrency community is eagerly anticipating a breach of the significant $3,500 price threshold, which would be a potential milestone for Ethereum to continue its rise to the coveted $4,000 price tag.
Notably, the price is currently well above the 50-day moving average of around $2,700, highlighting the strength of the ongoing bullish trend. Moreover, the 100-day moving average located at $2,400 serves as another important support level. Historically, these key supports have proven to be instrumental in pushing the price of Ethereum higher on retests.
ETH Surge: Is a Price Correction Coming Soon?
Ethereum (ETH) surged along with Bitcoin (BTC) on February 28, approaching an all-time high of $3,500. While the bulls are celebrating, technical indicators are hinting at a potential pause in the rally.
The CryptoQuant funding rate indicator, which reflects fees paid on perpetual futures contracts, shows a sharp rise in ETH on February 28th. Reaching 0.07% would mark the highest level since April 2021, surpassing the 0.06% high observed prior to ETH’s previous high of $4,800 in November 2021. Historically, these spikes in financing rates have often been preceded by price adjustments.
Source: CryptoQuant
The high CryptoQuant funding rate not only hints at a potential pause in the rally, but also raises concerns about the sustainability of the current momentum. Typically, such a sharp rise indicates an overheated market due to excessive bullish sentiment and highly leveraged long positions.
Crypto market cap now stands at $2.27 trillion. Chart: TradingView.com
There are two reasons why this scenario is extremely complex. First of all, if the price bounces, bulls can suffer significant losses. Second, it increases the likelihood of a long squeeze, an unusual situation in which strong short selling forces long position holders to liquidate, accelerating price declines.
ETH up 16% in the weekly chart. Source: Coingecko
Imagine the domino effect. Leveraged long positions receive margin calls and force liquidation, triggering further selling, driving the price down further and triggering more margin calls. This cascading effect can lead to panic selling and significant losses for overly optimistic investors.
While there is no guarantee that a prolonged squeeze will occur, the increased funding ratio serves as a harsh reminder of the inherent risks associated with chasing very prolonged rallies.
đź’¤ Dormant pre-mined address containing 72 #ETH (243,771 USD) was active in 8.6 years! https://t.co/K8769uQJ0w
— Whale Alert (@whale_alert) February 28, 2024
An old Ethereum whale has reemerged, sparking cryptocurrency speculation.
In another development, a mined Ethereum wallet has been reopened after nearly nine years of inactivity, according to data released by cryptocurrency tracking firm Whale Alert. There is 72 ETH worth $243,771 in it.
The tracking platform discovered that these 72 ETH funds were moved to other anonymous cryptocurrency wallets. According to recent sources, in addition to these wallets, numerous other dormant Ethereum whales woke up in February and were holding 100 ETH, 429 ETH, 3,465 ETH (worth about $10.4 million) and 100 ETH worth of pre-mined Ethereum. They have all been dormant for about nine years.
Featured image from Pixabay, chart from TradingView
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