Ethereum’s native token, Ether (ETH), experienced a significant recovery on September 12th, surging by more than 4.5% to reach a price of $1,622. This rebound came after the cryptocurrency had fallen to its lowest level in six months just the day before. The resurgence in ETH price was largely attributed to the diminishing concerns surrounding the potential liquidation of FTX, a defunct crypto exchange.
New court filings from FTX on September 11th revealed that the exchange held approximately $3.4 billion worth of cryptocurrencies, including $1.16 billion in Solana (SOL), $560 million in Bitcoin (BTC), and $192 million in Ether. As a result, FTX sought permission from a New York court to sell these crypto holdings in order to repay its creditors. The court’s response to this request was eagerly anticipated on September 12th, as some experts feared that the approval to sell such a large amount of crypto assets could trigger a market crash.
However, researchers at crypto analytics platform Messari argued against this notion, asserting that FTX’s holdings primarily consisted of illiquid and locked assets. For instance, only $9.2 million worth of SOL becomes unlocked each month, a figure that the market can easily absorb. Moreover, Messari highlighted that FTX’s $353 million BTC holdings represent only about 1% of the coin’s weekly traded volume. Consequently, it is likely that the market would be able to absorb a significant portion of any sell pressure resulting from the liquidation.
The recovery in the price of Ether on September 12th corresponded with a rise in short liquidations across Ether-linked derivatives. On that day, ETH liquidated approximately $8.37 million worth of short positions, surpassing the $1.66 million in long positions liquidated. Short sellers who wish to close their positions must buy the underlying asset, leading to an increase in demand. As a result, the combination of new buyers entering the market and short liquidations contributed to the upward movement of ETH price.
Furthermore, Ethereum’s daily relative strength index (RSI) dropped below 30 on September 11th, a level that is often considered to indicate an “oversold” zone by traditional analysts. This reinforced the idea that the cryptocurrency was due for a rebound. Additionally, Ether’s price bounce originated from a crucial support level of $1,545, which further contributed to the bullish sentiment.
The recent recovery in Ether’s price has brought it closer to testing the upper trendline of a falling wedge pattern, potentially signaling a breakout. Falling wedges are bearish reversal patterns characterized by two converging trendlines. Typically, the price resolves to the upside after breaking above the upper trendline, often rising by a distance equivalent to the wedge’s maximum height.
Should Ether achieve a decisive close above the upper trendline, it is possible that the cryptocurrency could reach $1,740 in September, representing an increase of over 8% from its current price levels. This level also coincides with ETH’s 50-day exponential moving average (EMA), adding further significance.
Conversely, if Ether experiences a pullback from the falling wedge’s upper trendline, there is a risk of a decline towards the lower trendline, potentially around $1,500. This would represent a potential 8% decline in September.
The recent recovery of Ethereum’s native token, Ether (ETH), reflects the easing concerns surrounding the potential liquidation of FTX’s crypto holdings. The rebound in price can be attributed to a combination of factors, including the liquidation of short positions, the oversold conditions indicated by the RSI, and the bounce from a significant support level. Looking ahead, the breakout potential indicated by the falling wedge pattern suggests a positive outlook for Ether’s price, with a target of $1,740 in September. However, caution should be exercised, as a failure to break above the upper trendline could result in a decline towards the lower trendline.