Ethereum price is expected to recover from the drop it suffered last week, following the building up of its shorts.
The world’s second-largest cryptocurrency, Ethereum (ETH), has entered a major correction amid the broader market crash. Following last week’s drop, the price of ETH has been hovering around $2,000 levels.
Santiment, an on-chain data provider, gives us some insight into what Ethereum’s next price action might be (ETH). On an 8-hour chart, the data provider noted that there have been heavy shorts building up for Ethereum at $2,000.
However, Santiment adds that this rarely ends well for the shorter, and a short squeeze is likely to ensue. As a result, the price of Ethereum may recover.
However, another worrying factor is the ETH exchange supply. Santiment notes:
“While we saw a nice drop in supply on exchanges for the past year or so, May 1st 2022 saw a huge increase in supply on exchanges as folks rushed to exit their positions, which is reflected on the price itself.”
As a result, any further increase in the exchange supply would fuel another drop. This indicates that investors are in a panic and have given up completely. Even though the situation appears to be dire, this could be an excellent time to fill new positions.
Some Positive Ethereum Indicators
Santiment cites Ethereum’s 90-day MVRV (Market-Value-to-Realized-Value) Ratio. It goes on to say that the MVRV, which “measures the mid-term profit/loss of holders,” “shows that we are almost into the opportunity zone, which historically has seen a local bottom develop with a decent R/R.”
On the other hand, global macros will continue to play a big role in deciding the crypto market momentum. Amid persisting inflation, the U.S. equity market and the S&P 500 are showing signs of weakness amid the fear of aggressive interest rate hikes by the Federal Reserve. At the same time, the fears of the United States going into a recession are high.
