Key takeaways
What explains Ethereum’s bounce above $4,000?
Ethereum surged 4.82% as whales increased their purchases, net exchange flow turned negative (-13.3k ETH), and seller exhaustion signaled a bullish divergence.
Can ETH support this uptrend?
If ETH breaks above the 50-day MA at $4,181, it could climb as high as $4.5k; however, macroeconomic headwinds could trigger a pullback to $3,819.
Since hitting a low of $3.6K four days ago, Ethereum (ETH) has been trading in an ascending channel, holding firmly above its long-term EMA.
At the time of writing, Ethereum was trading at $4,061, an increase of 4.82% in the last 24 hours. At the same time, trading volume increased 71% to $39.2 billion, reflecting increased on-chain activity and capital flows.
Is this the start of a lasting price recovery?
Ethereum Selling Pressure Eases
According to CryptoQuant, Ethereum formed two equal lows around $3.7K, while the altcoin’s cumulative net taker volume hit a higher low.
As a result, ETH experienced a bullish divergence, indicating an easing of selling pressure as sellers ran out of steam after a prolonged period of market dominance.
Source: CryptoQuant
As a reminder, during the October 11 crash, net taker volume fell to -$2.82 billion. Since then, it has climbed back to -$1.9 billion, showing the first signs of seller exhaustion.
Buyers mobilize, led by whales
With sellers exhausted, buyers rushed into the market to fill the gap. These buyers are mostly whales, as evidenced by CryptoQuant’s average spot order size data.
Source: CryptoQuant
This metric shows orders from large whales, signaling whale participation.
Interestingly, after reviewing exchange activity, AMBCrypto determined that these whales were primarily purchasing ETH.. According to data from CryptoQuant, Exchange Netflow dropped significantly, reaching a negative value.
Source: CryptoQuant
At press time, Netflow was -13.3k, a significant drop from the previous day’s 26.8k ETH. Such a dramatic shift indicates growing dominance of buyers in the market, with sellers facing displacement.
Futures Eye a Recovery
As Ethereum rebounded, investors rushed to futures to take strategic positions. In fact, Open Interest increased from $19.4 billion to $21.6 billion at press time, an increase of $2.2 billion.
Often, such a massive rise in OI signals increased participation in futures, with investors taking long or short positions.
Source: CryptoQuant
However, this increase in participation had an unexpected consequence: Binance investors faced massive liquidations.
According to CryptoQuant, Binance experienced over $500 million in long liquidations, resulting in the largest long squeeze in weeks.
Source: CryptoQuant
According to the analyst, these conditions are a blessing for the ETH price recovery. Indeed, historically, after long liquidations, ETH has tended to gradually recover.
Gradual recovery occurs, especially if the liquidation results in the elimination of highly leveraged investors.
Can ETH sustain the uptrend?
At press time, Ethereum reported a recovery as buyers stepped up, while sellers appeared exhausted after a prolonged period of dominance.
As a result, the altcoin’s sequential pattern strength declined from -12 to -1.1, signaling bearish exhaustion and emerging buyer strength.
Source: TradingView
These market conditions have historically emerged at the start of recovery phases and preceded a significant rebound in prices.
If these conditions are met, ETH will first recover its short-term MA (50MA) at $4,181. A sharp close above will strengthen the altcoin to reclaim $4.5K.
However, if market sentiment turns bearish again, influenced by macroeconomic factors as was the case a week ago, ETH will fall again towards $3,819.
