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Thursday, May 9, 2024

Ether Traders Stack Up Short Positions as Grayscale Pulls Plans for ETH Futures ETF

In a recent market twist, traders are moving to short Ether. This move comes as a response to the surprising decision by Grayscale Investments to withdraw its plans for an Ethereum futures exchange-traded fund (ETF).

The decision has sent ripples across the trading community, causing investors to brace for unexpected shifts in Ether’s price dynamics.

Ether Traders Doubt the Possibility of ETH Spot ETF

Over the past 24 hours, traders have been seen stacking up their short positions on Ether, indicating a growing bearish sentiment in the market.

This surge in short positions comes as Ether’s price hovers very close to a crucial support level at $3,010, registering a modest decline of 1.85%. The striking thing is the confidence displayed by traders in their downward outlook for Ether. 

Liquidation maps reveal that a staggering $345 million worth of short positions are poised to be liquidated if Ether’s price experiences a mere 3% increase. In contrast, a similar 3% drop to $2,920 would only wipe out $237 million in long positions.

Notably, Grayscale’s decision to pull its Ether futures ETF application on May 7 has added fuel to the fire, intensifying speculation within the crypto community.

The sudden withdrawal, just weeks before the scheduled decision by the Securities and Exchange Commission (SEC), has left many traders reevaluating their strategies amid heightened uncertainty.

Furthermore, the question of whether Ether will be classified as a security, coupled with the uncertainty surrounding spot Ether ETF applications, has further complicated matters for traders.

Having expressed optimism about the prospects of a spot Ether ETF approval earlier, analysts are now growing increasingly skeptical as the May 23 deadline approaches.

The crypto community also echoes this skepticism, evidenced by a staggering 92% of participants on Polymarket anticipating the denial of spot Ether ETFs. 

Moreover, broader concerns regarding Ethereum’s usage and the lack of speculative interest from short-term holders are adding to the prevailing sense of unease among traders.

In light of these developments, crypto on-chain analyst James Check, also known as Checkmatey, raised alarms about Ethereum’s current usage patterns. In his recent post on X, he emphasized that Ethereum’s usage is currently insufficient to keep pace with the issuance to validators.

Usage of Ethereum is currently so low, that their burn mechanism is not keeping up with issuance to validators.

Gas prices are below 4gwei, which you have to go back to early 2020, and pre ‘defi summer’, to find an equivalent period of low demand.

‘but mah L2 scaling’ –> The… https://t.co/WUHyG9YKFF ↗

— _Checkmate 🟠🔑⚡☢️🛢️ (@_Checkmatey_) May 8, 2024 ↗

Ethereum Price Prediction

Despite recent Glassnode observations regarding Ether’s under-performance relative to Bitcoin in this cycle, there were pockets of optimism among traders just days before the analysis.

Some traders, like the pseudonymous crypto trader Ash Crypto, shared their bullish sentiments. Ash Crypto suggested a potential breakout for Ether’s price by the end of 2024.

The trader pointed to historical patterns, drawing parallels with a similar behavior seen in the fourth quarter of 2020. This signals a potential breakout in the third quarter of 2024.

Another crypto commentator, TheCryptoPalace, also shared insights with his audience. He highlighted Ethereum’s current movement within a falling wedge pattern.

According to TheCryptoPalace, Ether’s price was testing a significant support zone, suggesting the possibility of sideways movement around this support area.

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BFIA Admin
BFIA Admin
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