Ethereum’s native token, Ether (ETH), gained over 4.5% to reach $1,622 on Sep. 12 despite falling to its lowest level in six months the day before.
The ETH price recovery on Sep. 12 occurred as worries about a potential FTX liquidation receded.
Ethereum market can absorb potential FTX dump
New FTX court filings on Sep. 11 showed that it holds $3.4 billion worth of cryptocurrencies, including $1.16 billion in Solana (SOL), $560 million in Bitcoin (BTC), and $192 million in Ether. The defunct crypto exchange has requested a New York court to sell its crypto holdings to refund creditors.
The court will respond to the request on Sep. 12 as some believe that the approval to sell $3.4 billion worth of crypto assets could spark a market crash.
However, researchers at crypto analytics platform Messari argue that FTX will not negatively impact the crypto market, noting that their holdings comprise mostly illiquid and locked assets. For example, only $9.2 million worth of SOL gets unlocked per month, which is absorbable by the market.
Also, as Messari explained, FTX’s $353 million BTC holdings are roughly 1% of the coin’s weekly traded volume. That means the market will likely absorb much of the Bitcoin and Ether sell-pressure
That perhaps explains why, as of Sep. 12, Ether price has recovered the entire losses it suffered a day before.
Short liquidations overpower longs
The Ethereum market gains on Sep. 12 coincide with a run-up in the short liquidations across Ether-linked derivatives.
Notably, Ether has liquidated $8.37 million worth of short positions versus $1.66 million in long positions on Sep. 12. Short sellers liquidate their positions by buying the underlying asset. Therefore, the combination to new buyers and short liquidations have pushed up the price of ETH.
Oversold bounce
Ether’s daily relative strength index (RSI) dropped below 30 on Sep. 11, which traditional analysts view as an “oversold” zone.
In addition, ETH price bounce has originated from an important locsupport level of $1,545.
Ethereum technical analysis for September 2023
Ethereum’s latest bounce has brought its price closer to testing its falling wedge’s upper trendline for a potential breakout.
Related: Bitcoin price must take $26K, trader says after ‘textbook short squeeze’
Falling Wedges are bearish reversal patterns characterized by the price consolidating between two descending, converging trendlines. They typically resolve after the price breaks above the upper trendline and rises by as much as the wedge’s maximum height.
As a result of this technical setup, Ether’s decisive close above the upper trendline may lead to $1,740 in September, up over 8% from current price levels. What’s more, the level coincides with ETH’s 50-day exponential moving average (50-day EMA; the red wave in the chart below).
Conversely, a pullback from the falling wedge’s upper trendline risks dropping the ETH price near the lower trendline around $1,500 for a potenti 8% decline in September.
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