The Rise and Fall of Ether: Examining the Recent Price Recovery

The Rise and Fall of Ether: Examining the Recent Price Recovery

Ether (ETH), the native token of the Ethereum blockchain, experienced a significant recovery on September 12th, gaining over 4.5% to reach $1,622. This resurgence came as a surprise considering the cryptocurrency had hit a six-month low just the day before. The sudden price rebound coincided with diminishing concerns surrounding a potential liquidation of FTX, a defunct crypto exchange that has requested permission from a New York court to sell its cryptocurrency holdings in order to repay its creditors.

The court’s response to FTX’s request, expected on September 12th, has sparked speculation among some market participants. They worry that the approval to sell $3.4 billion worth of crypto assets could potentially trigger a market crash. However, researchers at Messari, a crypto analytics platform, argue against this notion. They assert that FTX’s holdings mainly consist of illiquid and locked assets, making them less likely to have a significant negative impact on the overall crypto market.

FTX currently holds approximately $1.16 billion worth of Solana (SOL), $560 million in Bitcoin (BTC), and $192 million in Ether. According to Messari, only $9.2 million worth of SOL gets unlocked per month, which the market can comfortably absorb. Additionally, FTX’s BTC holdings amount to roughly 1% of the coin’s weekly traded volume, suggesting that the market will be able to absorb a large portion of any potential sell-pressure caused by the liquidation.

The recovery in Ether’s price on September 12th aligns with a surge in short liquidations across Ether-linked derivatives. On that day alone, short sellers were forced to liquidate $8.37 million worth of their positions, while long positions saw only $1.66 million in liquidations. The combination of new buyers entering the market and short liquidations has driven up the price of ETH.

Moreover, traditional analysts consider Ether’s daily relative strength index (RSI) dropping below 30 on September 11th as an “oversold” indication. This may have prompted buyers to seize the opportunity and contribute to the price recovery.

One noteworthy aspect of Ether’s recent bounce is its rebound from a crucial support level at $1,545. Additionally, this upward movement brings the cryptocurrency’s price closer to testing the upper trendline of a falling wedge pattern. Falling wedges are bearish reversal patterns characterized by the price consolidating between two descending, converging trendlines. Typically, these patterns are resolved when the price breaks above the upper trendline and rises by the wedge’s maximum height.

Considering this technical setup, a decisive close above the upper trendline could potentially propel Ether’s price towards $1,740 in September, representing an increase of over 8% from the current levels. Significantly, this level coincides with ETH’s 50-day exponential moving average (50-day EMA).

However, it is important to consider the possibility of a pullback from the falling wedge’s upper trendline. Such a scenario could result in a decline in Ether’s price, possibly testing the lower trendline around $1,500. If this happens, it could potentially lead to an 8% decline in September.

Ether’s recent price recovery, following a brief dip to a six-month low, has surprised many in the crypto market. The uncertainty surrounding FTX’s potential liquidation has raised concerns about a market crash. However, experts argue that the impact of FTX’s holdings is likely to be minimal since they primarily consist of illiquid and locked assets. The surge in short liquidations, coupled with Ether’s bounce from a significant support level, has fueled the price recovery. Technical indicators, such as the falling wedge pattern, suggest the possibility of further price gains in September. Nevertheless, the market should not dismiss the potential for a pullback, which could lead to a decline in Ether’s price. Overall, the recent price movement of Ether highlights the dynamic nature of the cryptocurrency market and the importance of analyzing various factors to understand its fluctuations.

Analysis

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