Ethereum is currently facing a short-squeeze risk as depicted by the rising Estimated Leverage Ratio (ELR) which acts as a crucial indicator of market sentiment.
As the ELR has increased over the past few months, it reflects a growing number of traders adopting high-leverage short positions.
Ethereum Faces Short-Squeeze Risk
CryptoQuant data, as shared by market analyst ‘ShayanBTC,’ suggests that traders are betting on further declines in ETH’s price amid an ongoing bearish outlook. With leverage levels reaching concerning highs, the futures market appears overheated, putting Ethereum at risk of a short squeeze.
ETH has shed over 2% in the past day alone and is currently trading just above $2,580. If the crypto asset price unexpectedly rises, those holding short positions may be compelled to buy back ETH to cover their losses, leading to a rapid price spike.
The 100-day moving average at $2,700 serves as a significant resistance level. As such, a breakout above this threshold could trigger substantial short liquidations, further propelling ETH’s price upward.
Decline in Institutional Appetite
Meanwhile, data also points to a waning institutional appetite for ETH in the US market despite spot Ether ETFs attracting net inflows of $11.94 million on Tuesday, primarily driven by BlackRock’s ETHA fund. Other investment vehicles posted no flows. According to CryptoQuant’s analysis shared by analyst “burakkesmeci,” Ethereum’s Coinbase Premium Index has fallen below its 14-day Simple Moving Average (SMA).
This crossover typically signals increasing selling pressure from US investors, which could potentially lead to price declines in ETH.
Looking at the Current Value, the Coinbase Premium Index stands at -0.05062437, while its 14-day Simple Moving Average (SMA 14) is -0.03906392. It is important to note that Coinbase serves as a preferred platform for institutional investors, and the fact that the current Premium Index is more negative than its SMA potentially signals that larger players are reducing their ETH exposure.
