Ethereum (ETH) derivatives traders have reacted to the altcoin's failure to maintain the $3,500 level by increasing their short positions. This increase in bearish bets suggests that a majority of traders expect ETH prices to continue to decline.
However, do other metrics align with this view? This on-chain analysis explores whether these traders can make the right call – or if the data hints at a potential recovery.
Short selling of Ethereum far exceeds long positions amid profit-taking
As this article was written, the liquidation map shows that Ethereum derivatives traders have opened short positions worth a total of $918 million since the cryptocurrency's price dropped yesterday.
In trading, buying or selling reflects the trader's expectations about price volatility. Opening a long position indicates that the trader believes the price will rise. On the other hand, short selling indicates they expect a decline.
Currently, long positions in ETH are valued at around $218 million, highlighting that short positions have significantly outpaced the $700 million increase. However, it is important to note that if Ethereum's price rises to $3,700, most of these high-leverage positions may face liquidation.
Ethereum liquidation map. Source: Coinglass
However, data from Glassnode indicates that these traders may not face liquidation unless a significant recovery occurs. This is primarily due to the increase in realized profits, indicating that traders have taken profits by selling or transferring assets at higher prices.
As of the press time, Ethereum's realized profit has risen to $659.22 million, indicating that most sell orders have taken advantage of price volatility and may be less likely to be liquidated in the short term.
Ethereum has realized profits. Source: Glassnode
ETH Price Prediction: Bearish
Since November 16, the price of ETH has been trading within an ascending channel. An ascending channel is a chart pattern formed by two upward trend lines, one drawn above the price (resistance) and the other below (support).
This pattern indicates that prices are moving higher within a defined range. The support line shows where prices tend to bounce higher, and the resistance line marks where prices face selling pressure.
As seen below, ETH, at $3,314, has dropped below the support line. If selling pressure increases, the value of the cryptocurrency could fall to $3,033.
Ethereum 4-hour analysis. Source: TradingView
However, Ethereum derivatives traders need to be cautious. If the altcoin does not drop below $3,220, this may not happen. Instead, the value could rise to $3,547 and possibly increase to $4,000.