ETH Goes Through Leverage Shakedown But Accumulation May Intensify

ETH price was on track to conclude the first 7 days of 2024 on a bullish trend. Especially after price pulled back since mid-December in a natural post-rally retracement.

ETH experienced a flash crash during which it lost roughly 8.3% on Tuesdays trading session. Closer investigation into the crash reveals that it may have been a liquidity shakedown.

However, the crash on Tuesday undid the previously achieved gains. The large pullback had all the makings of a liquidity shakedown.

For example, whale activity demonstrated outflows since late December and well into the first week of January despite the price uptick.

How the ETH liquidation Set-Up Played Out

Prior to the rally, ETH price action experienced some consolidation in the last week of December underpinning directional uncertainty.

However, the subsequent uptick offered some confidence about the cryptocurrencys direction. As such, appetite for leverage created an opportunity for long liquidations.

ETH liquidations / source: Coinglass

The return of sell pressure resulted in $166.45 million in long liquidations in the last 2 days. Such liquidations are quite common especially during periods characterized by a lot of excitement and strong appetite for leverage.

Unsurprisingly, Ethereums estimated leverage ratio has been steadily rising over the last few months.

It peaked at a new ATH on Friday last week. However, this peak was swiftly followed by a spike in long liquidations.

ETH estimated leverage ratio and long liquidations / source: CryptoQuant

Although ETH kicked off the year with some bullish momentum, it was the opposite for whales because they were taking profits.

This underscores a short term focus, which also boosted the chances of a retracement. Outflows from whale addresses were evident in the form of a sharp dip in IntoTheBlocks large holder netflows indicator. However, the latest large holder inflow and outflow data reveals that inflows were higher than outflows.

ETH large holder flows / source: IntoTheBlock

ETH inflows on 7 January peaked at 519,620 ETH while outflows on the same day added up to 411,300 coins. A net gain for the cryptocurrency, underscoring higher demand than sell pressure from the whale category at recent lows.

Does this mean that ETH is finally ready to bounce back up？ The return of whale demand suggests that price could find support between $3032 and $3221. A bounce-back from this range may not necessarily indicate the beginning of a major rally.

Can ETH Price still rally above $10,000 in 2025？

Recent supply and demand characteristics highlight a temporary return to short term price swings. Nevertheless, the long term outlook still remains positive.

One of the major reasons for the optimism is the upcoming shift to a pro-crypto administration in the U.S. This development is expected to have far reaching implications in the crypto market especially in regards to regulations.

There is another major development that could supercharge ETH adoption. The Ethereum network is slated to go through a major upgrade dubbed Pectra.

Preliminary information about the Pectra upgrade revealed that there will be staking improvements. This includes raising validator staking cap to 2048 ETH from the current 32 ETH.

The improvements will also extend to scalability and staking. Including staking rewards to boost participation. These changes could potentially boost ETH attractiveness in the long run.