Now that the crypto market is cooling down after last week’s rally, it is important to look at what’s happening on the sidelines. Ethereum [ETH], in particular, reached a noteworthy level at press time, giving rise to bearish expectations.
ETH’s upside recently pushed into an end-of-May and early June resistance level. The bulls have consequently gone into a recess, thus leading to a surge in bearish expectations. As such, short positions are piling up. A recent analysis took a look at one particularly interesting large short position.
A $12 million short position on ETH meant that some whales were optimistic about the potential downside opportunities. Such positions will cash out large if the price dips. On the other hand, they stand to lose if the bulls resume control over the market.
A look at ETH’s long versus short ratio reveals that both are almost evenly matched, with longs slightly higher.
The level of shorts and longs is an important indicator. This is because it has the potential to determine the market outcome. Higher short positions than longs may discourage short-term holders and trigger sell pressure.
On the other hand, short position liquidations, especially in large amounts, may trigger more bullishness.
Are the bears on the hunt?
The opposite is true for heavy liquidation of long positions. It thus warrants a look at factors such as leverage and demand in the derivatives market.
The demand in the derivatives segment bounced back on 19 June, while the estimated leverage ratio bounced back on 23 June.
The surge in leverage is especially noteworthy because of ETH’s press time price level. The recent upside pushed ETH into a short-term resistance level above the $1,930 price range.
As a result, the level of sell pressure and bearish expectations were on the rise. This explained why short positions are rising and may overtake the longs.
Where Ethereum stands
It’s worth noting that ETH’s MFI was approaching the overbought zone at press time. This, combined with the surge in leverage, suggested that bearish expectations were on the rise.
Interestingly, exchange flow data revealed a surge in sell pressure. ETH’s exchange inflow pivoted and grew slightly in the last two days. Meanwhile, exchange outflows continued dipping during the same time.
These findings reveal that ETH may face more sell pressure in the next few days. Short sellers, such as the one highlighted earlier, are banking on such an outcome.
However, there is still a chance that whales might be incentivized to push the price up and trigger short liquidations.