Key Points
- Ethereum saw a price surge, testing the $2,500 resistance level.
- The increase in Ethereum exchange reserves suggests traders are capitalizing on the surge by moving profits to exchanges.
Ethereum, a leading cryptocurrency, recently experienced a significant price surge, testing the important resistance level of $2,500.
The question on everyone’s mind is whether this bullish momentum will continue or if the bears will regain control.
Ethereum’s Recent Performance
The last week of August saw a considerable pullback for Ethereum, erasing most of the gains it had made during the first week of the month. This was when the cryptocurrency tested the $2,700 ceiling.
However, the bearish tone that started September changed as Ethereum surged over 3% in the past 24 hours, trading at $2,521.
Despite the price surge, the altcoin season index fell, indicating weak investor confidence in the ongoing bullish trend.
Increasing Exchange Reserves
A well-known crypto analyst pointed out a significant development, suggesting the start of a distribution phase. This is evident from the spike in Ethereum exchange reserves, indicating that more traders are taking advantage of the recent surge by moving their profits to exchanges before the hype subsides.
Each time Ethereum has closed near its resistance level, it has been accompanied by an increase in Ethereum exchange reserves.
For example, when Ethereum tested the $4,050 resistance earlier in March, the exchange reserves spiked from $19.5 million to $20.8 million.
Similarly, when Ethereum’s price broke above the $2,800 ceiling last month, rising exchange reserves led to strong resistance, preventing bulls from pushing the price higher.
The chart above showed a notable spike in exchange reserves from $18.5 million to $18.7 million the day after Ethereum experienced a significant surge on the 2nd of September.
This confirmed the conventional day trading strategy of locking in profits as soon as the price showed a slight upward trend.
However, to counter this algorithmic behavior, new traders must enter the market while long-term holders avoid selling.
Despite the uptick in Open Interest among Futures traders, a much stronger increase in Open Interest would be needed to guarantee a sustained bullish swing.
While Futures traders show limited optimism for a guaranteed Ethereum price surge, long-term holders have been routinely selling a portion of their aged coins, signaling a bearish trend.
On the 23rd of August, the age-consumed soared to an astounding $629 million, which subsequently led to a price plunge.
Additionally, a negative MVRV ratio indicated that the current market value of Ethereum is below its realized value, indicating that the asset may be undervalued. It can signal a potential buying opportunity.
However, the lack of a significant Open Interest surge could indicate that the true value of Ethereum has not yet been realized.
The recent 3% surge might have been a bluff, leading to $34 million in short liquidations and pushing Ethereum to test the crucial $2,500 level.
However, due to lack of strong buying activity, the chances of a breakout had diminished.
In short, if buying activity doesn’t increase, Ethereum could face around $40 million in long liquidations if it falls below the $2,500 support, retracing its price back to $2,300.
