Ethereum’s price has experienced a massive crash today, sending shockwaves throughout the crypto market.
Many investors are now wondering whether this is the beginning of a new bear market or a substantial short-term liquidation event.
Technical Analysis
By Edris Derakhshi (TradingRage)
The Daily Chart
As the daily chart suggests, the Ethereum price dropped all the way back to the $2,100 level before experiencing a rebound. The $3,000 level and 200-day moving average, located around the same price mark, has been broken to the downside yesterday.
This has been one of the primary contributing factors to today’s crash, at least on the technical side of events, as the 200-day moving average is a key trend indicator, and if the market fails to climb back above it soon, a longer and even deeper correction could be expected.
The 4-Hour Chart
On the 4-hour chart, it is evident that the price has recently tried to break above the large falling wedge pattern, but the breakout was a fake one.
This bull trap has led to a considerable drop, as the $2,800 level is also lost and can now be seen as a resistance zone. Therefore, if a quick recovery does not occur, a consolidation between the $2,800 and $2,400 levels is likely for the upcoming weeks.
Sentiment Analysis
By Edris Derakhshi (TradingRage)
Ethereum Open Interest
While Ethereum’s price action indicated some clues that were pointing to today’s market crash, more research has to be done on the underlying market dynamics. Analyzing the futures market metrics can provide a distinct picture of the current situation.
This chart presents the ETH price and the 7-day exponential moving average of the open interest metric, which measures the total number of open perpetual futures contracts on centralized exchanges.
As the chart demonstrates, while the asset has experienced a massive drop, the open interest is still not showing a significant decline. Therefore, if the crash is to be seen as a liquidation cascade, the futures market has not cooled down yet, and there could be more liquidations and drops in the short term in case the current selling pressure persists.
