Key Points
- Ethereum’s price dip to $2.3K has led to increased activity from whales.
- Despite a slight recovery, the market remains uncertain due to excessive volatility and competition.
Ethereum [ETH] is currently going through a challenging market cycle, with a weekly decline of over 6%.
As the worst-performing among the top five altcoins, this downturn raises serious questions about Ethereum’s future.
Increased Market Leverage
The rising competition from Solana [SOL] and changing market dynamics are putting Ethereum’s resilience to the test. A significant factor to watch is the high level of leverage in the market.
Historically, a surge in the Margin Lending Ratio often leads to forced selling, causing a price drop until the ratio normalizes.
A sharp rise in this ratio indicates that many traders are borrowing to bet on higher prices, often resulting in a market pullback.
Recently, the ratio jumped from 38 to 72, indicating a heavy borrowing of USDT. Long positions can signal bullish sentiment but can also cause issues in a volatile market.
If prices start to drop, traders who borrowed funds may need to sell their assets quickly to cover their loans, leading to further price drops.
Ethereum’s Crucial Support Line
According to a recent post by Santiment, Ethereum is trading near a vital support line that has been tested four times in less than two months.
This repeated testing strengthens the notion that the current price could be a good dip-buying opportunity.
Moreover, Ethereum’s whale activity has reached a six-week high as its price dropped to $2,380 on October 25th. This increase in whale transactions suggests accumulation by major stakeholders.
However, the current price level doesn’t guarantee an immediate bounce, and the market remains uncertain due to the excessive volatility resulting from a spike in open interest (OI) to $13 billion.
A large influx of long positions could be triggered, especially if Bitcoin continues its downward trend.
Therefore, monitoring the $2.4K support level will be crucial. A likely divergence could push ETH closer to $2.3K, potentially setting the stage for a reversal.
With Futures traders currently holding significant influence, Ethereum’s next move may depend on how this support level holds up in the coming sessions.
