Does Ethereum's Recent Drop to $2,000 Indicate a Decrease in Bullish Momentum for ETH?

Ether witnessed a notable 14% decline on January 3rd amid a broader cryptocurrency market sell-off, dropping from $2,380 to $2,050 within less than two hours. This price level had not been observed since December 1, 2023, resulting in the liquidation of $100 million worth of ETH long futures contracts – leveraged bets anticipating a price increase.

Source: en.bitcoinsistemi.com

Traders are now questioning the implications of this correction, pondering whether it marks the end of the bullish momentum after three unsuccessful attempts to breach the $2,400 barrier in the last month. Interestingly, this incident marked the third time Ether's price fell below $2,150 during the same period, making it challenging to conclusively assert the conclusion of the bullish trend.

One notable aspect of the price chart is the rapid recovery to $2,230 on January 3rd, suggesting that the factors triggering panic selling and derivatives liquidations have weakened. Some attribute this event to a market analysis released on the same day, pointing to the anticipated denial of the spot Bitcoin ETF, published by Matrixport. Worth mentioning is that Jihan Wu co-founded Matrixport, recognized for his successful venture in the ASIC miner business at Bitmain.

Crucially, investors are taking into account the latest statements from Eric Balchunas, a senior ETF analyst at Bloomberg. Balchunas noted in an interview with Cointelegraph that the approval odds stand at 90%, emphasizing that the final decision from the U.S. The Securities and Exchange Commission might take longer. The markets appear to have overreacted in both directions: displaying excessive confidence in the January 10 deadline and struggling to discern Matrixport analysts' opinions from actual news and events. Attorney and commercial litigator Joe Carlasare succinctly summarized the situation in a social media post. This assessment is derived from an examination of the ETH monthly futures annualized premium, which should typically fall within the range of 5% to 10% in healthy markets.

The data suggests a rising demand for leveraged ETH long positions, with the futures contract premium surging from 11% on December 18, 2023, to 27% on January 2, 2024. However, sustaining such positions for extended periods became costly for buyers. This increase in the metric followed a 15% rally in ETH's price during that time frame. The last instance of Ether bulls facing a significant loss in the futures markets was on August 17, 2023, when $170 million worth of long positions were liquidated. A comparable intraday 15% correction occurred, bringing the price down from $1,800 to $1,530, but ETH swiftly rebounded to $1,680 within two hours. However, the price recovery was not sustained in the medium term, as ETH revisited the $1,530 bottom on September 11, 2023.

Disclaimer: FameEX makes no representations on the accuracy or suitability of any official statements made by the exchange regarding the data in this area or any related financial advice.