Ethereum price is experiencing a cooling period with resistance at $3500.
The price has more headwinds with active sellers dampening sentiment.

Ethereum (ETH), the second-largest cryptocurrency by market capitalization, which recently hit a record high of $3,500, now finds itself at a resistance zone, leaving analysts concerned over a potential short-term correction.

Factors Behind Current Ethereum Surge

As highlighted in a report, the recent rally in Ethereum’s price can be attributed to several factors. A key contributing factor is Bitcoin’s climb to a more than 27-month high of $64,000, which has injected bullish sentiment into the overall crypto market. 

Additionally, increasing funding rates and rising buying pressure on exchanges like Coinbase have contributed to the upward momentum. Moreover, the anticipation surrounding the impending Dencun upgrade as formerly reported by Crypto News Flash has fueled investor optimism about the long-term prospects of Ethereum.

However, the recent surge in Ethereum’s price towards $3,515 was accompanied by a surge in the cost of bullish leverage positions, raising concerns among investors. Building on previous reports by Crypto News Flash, JPMorgan’s analysis also suggests a cautious approach, indicating that major catalysts might already be priced in.

Over the last 24 hours, the crypto market witnessed an increase in liquidations, with total liquidations surpassing $750 million. Ethereum alone experienced nearly $120 million in total liquidations, with sellers liquidating approximately $70 million worth of positions.

Furthermore, volatility around the $3,500 mark led to $102 million worth of ETH liquidations, primarily targeting long positions. This situation further worsened leverage for existing bullish positions, as the drop in price reduced their margins.

Currently, the funding rate of Ethereum stands at 0.067%, equivalent to 5.6% monthly, substantially higher than the previous weeks’ average. Such elevated funding rates may suggest a potential for unsustainability if maintained over an extended period.  Furthermore, as prices hover around the $3,300-$3,500 range, an increasing number of short-term holders are choosing to abandon the market, putting downward pressure on the price.

Is it Time to Sell ETH?

For investors considering whether now is the time to sell Ethereum, it’s essential to assess their individual risk tolerance and investment goals. While short-term corrections are a natural part of any market cycle, Ethereum’s long-term fundamentals remain strong. 

The Netflow metric, indicating the volume of Ethereum flowing into exchanges versus those leaving, has surpassed the signal line and is currently in positive territory. This suggests a growing accumulation of ETH in exchange reserves, potentially increasing selling pressure and triggering further corrections in the price.

With resistance at $3,500, ETH is expected to experience price adjustments, with sellers being more active at higher levels. Nonetheless, traders have demonstrated resilience near this threshold, preventing large declines. 

As of now, ETH price stands at $3,413, reflecting a modest increase of 0.14% over the past 24 hours, with trading volume decreasing by 34.8% to $15.6 billion, according to data from MarketCap.

 

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Filed under: Bitcoin - @ March 3, 2024 7:59 am