The native token of Ethereum, Ether (ETH), experienced a significant gain of over 4.5% on September 12th, reaching $1,622. This recovery came after ETH fell to its lowest level in six months the day before. The positive movement in ETH price was attributed to diminishing concerns over a potential liquidation event at FTX.
FTX Court Filings and Crypto Holdings
New court filings by FTX on September 11th disclosed that the defunct crypto exchange possesses approximately $3.4 billion worth of cryptocurrencies. Among its holdings are $1.16 billion in Solana (SOL), $560 million in Bitcoin (BTC), and $192 million in Ether. FTX has requested a New York court’s permission to sell these crypto assets in order to refund its creditors. The court is expected to respond to this request on September 12th. Some experts speculate that approving the sale of $3.4 billion worth of crypto assets could potentially trigger a market crash.
However, researchers from Messari, a crypto analytics platform, argue that FTX’s liquidation is unlikely to have a detrimental effect on the crypto market. They note that a large portion of FTX’s crypto holdings consists of illiquid and locked assets. For example, only $9.2 million worth of SOL becomes available for trading each month, which is absorbable by the market. Additionally, Messari points out that FTX’s $353 million BTC holdings make up just 1% of the coin’s weekly traded volume. This suggests that the market will likely be able to absorb a significant amount of the selling pressure from Bitcoin and Ether, further contributing to the stability of the market.
The Recovery of Ether Price and Liquidations
The recovery of Ether’s price on September 12th aligned with a surge in short liquidations across Ether-linked derivatives. On that day, Ether liquidated approximately $8.37 million worth of short positions, compared to only $1.66 million from long positions. Short sellers typically close their positions by purchasing the underlying asset. Thus, the combination of new buyers and short liquidations helped drive up the price of ETH.
The daily relative strength index (RSI) for Ether dropped below 30 on September 11th, a level that traditional analysts consider as oversold. Moreover, the bounce in ETH price originated from a crucial support level at $1,545. As a result, Ether’s price is now edging closer to testing the upper trendline of a falling wedge pattern, suggesting the possibility of a breakout. Falling wedges are bearish reversal patterns characterized by price consolidation between two descending, converging trendlines. Typically, these patterns resolve with a breakout above the upper trendline, leading to a price increase of the wedge’s maximum height.
Potential Price Targets and Risks
Given this technical setup, a decisive close above the upper trendline of the falling wedge in the coming days could propel Ether’s price towards $1,740 by the end of September, representing an increase of over 8% from the current levels. This target level also aligns with ETH’s 50-day exponential moving average. On the other hand, a pullback from the upper trendline of the falling wedge pattern may expose ETH to potential downside, with a possible decline towards the lower trendline around $1,500, suggesting an 8% decrease in September.
Despite concerns over FTX’s liquidation and the potential market impact, Ether’s price managed to recover on September 12th. The combination of short liquidations and new buyers contributed to this rebound. Furthermore, technical indicators indicate the possibility of a breakout in Ether’s price, potentially leading to a significant increase in the coming weeks. As with any market, there are risks involved, and a failure to break above the upper trendline of the falling wedge pattern could result in a downward move for ETH. However, the overall sentiment remains cautiously optimistic for Ether’s future performance.
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