Ether (ETH) future short positions have been wiped out on mass in the last two days, as the world’s second-largest cryptocurrency by market capitalization defied the bears and rallied in wake of Wednesday’s highly anticipated series of upgrades to the Ethereum blockchain.
ETH surged above $2,100 on Friday for the first time since May 2022, taking weekly gain to more than 13%.
That means Ether is on course for its largest one-week gain in around three months.
As a result of ETH’s bullish breakout, over $90 million in ETH future short positions have been wiped out in just the last two day, as per data from crypto derivatives analytics website coinglass.
Indeed, Friday’s $62 million wipeout marks the largest short liquidation event in over a month.
The latest series of Ethereum upgrades implemented on Wednesday, amongst other things, allowed staked ETH tokens to be withdrawn for the first time.
Some analysts and traders had worried that investors might rush to unstake and sell ETH tokens on mass, creating short-term selling pressure that could have weighed on the price.
But on-chain data, as discussed in an article on Thursday, revealed that the successful implementation of flexible ETH staking actually saw the total number of staked ETH tokens rise on Thursday, rather than decline.
As of Thursday, there were a total of 18.257 million ETH tokens staked, up from 18.131 million on Monday.
Traders responded by aggressively unwinding bearish bets that the upgrade would trigger short-term sell pressure, sending ETH crashing above $2,100.
And the bulls seemingly remain in control. According to separate data presented by coinglass, the funding rate on leveraged ETH futures positions remains positive.
This means that traders opening leveraged long ETH futures positions are paying funding to those opening leveraged short ETH futures positions, an indication that demand is skewed in favor of long positions.
Where Next for the ETH Price?
On-chain network utilization fundamentals still look a little weak despite the returning crypto bull market, with high transaction costs pushing more users towards Ethereum layer-2 scaling solutions like Polygon and Arbitrum, as well as competitor chains like Solana.
But deflationary ETH supply tailwinds coupled with optimism that Ethereum continues to make progress towards addressing its scalability issues mean that, on balance, Ethereum network fundamentals should remain supportive of the price for the foreseeable future.
Flexible ETH staking means more investors are expected to lock up their ETH tokens in greater number, taking circulating ETH out of supply (assuming ETH stakers wish to hold their staking positions for the long term).
Meanwhile, ETH’s supply inflation rate has been consistently negative in recent months, with the burn rate (essentially all ETH paid in transaction fees is taken out of the supply) having consistently exceeded the issuance of new ETH tokens to stakers.
Elsewhere, with macro conditions also improving as US inflation keeps falling and recession risks rise, increasing the likelihood that a Fed rate cutting cycle is nearly here, medium to long-term risks seem strongly tilted in favor of continued ETH price upside in the coming months.
Short-term technicals are certainly also screaming positive.
ETH had been finding strong support at its 21-Day Moving Average in recent weeks, which technicians take as a strong vote of confidence by the market in short-term bullish price momentum.
All of ETH’s major moving averages are moving higher in consecutive order.
The strong rebound from the 200DMA in mid-March and golden cross (when the 50DMA went above the 200DMA) in early February are also positive medium to long-term technical signs.
With ETH/USD comfortably above resistance in the form of last August’s highs in the $2,030 area and already in the $2,100s, a melt-up towards the psychologically important $3,000 area in the coming weeks is a possibility.
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