ETH whales are leading the charge in the recent rally. Short squeeze turbocharges ETH’s momentum after exiting the bear trap.

Ethereum [ETH] closed out a bearish second week of February, but the tide was turning as of this writing. The crypto market delivered a bullish performance over the past two days and ETH was not left behind.

Read Ethereum’s [ETH] Price Forecast 2023-24

As ETH bulls have recaptured dominance, the latest warnings have revealed the hold they had over the market at the time of writing. According to Glassnode, the number of addresses holding at least 10,000 ETH hit a four-week peak on February 15. In other words, ETH whales have kicked their accumulation into high gear.

Addresses with at least 1,000 ETH also showed something similar, as the stat grew to its highest point since early February 2023. This confirmed that whales were piling up, continuing the trend seen in January 2023.

Source: Glassnode

The state of the ETH demand

A look at ETH’s exchange flows revealed that there was still significant selling pressure at the time of writing, implying that several investors were bearish. But the general situation, in terms of exchanges, was that there was a higher net outflow.

Source: CryptoQuant

The higher exchange rate outflows coupled with strong whale demand have had a notable impact on the price of ETH. It rallied 11.48% from its press price of $1665.30. However, this advantage puts it in the same range as the resistance level, where it failed to break through in the past three weeks.

Source: TradingView

ETH’s ability to sustain bullish momentum will depend on it being able to sustain demand. An increase in selling pressure near the resistance means a higher chance of another selling wall forming. On the other hand, the bulls may aim to move higher by maintaining strong demand.

One of the ways to monitor demand is by looking at the demand from the derivatives market. ETH’s open interest statistic registered an uptick between Feb. 12 and Feb. 14. It has since returned to its downtrend, suggesting that demand for derivatives was slowing at the time of writing.

Source: CryptoQuant

Another bearish retracement may be in store for ETH if the spot market mimics the above observation in the derivatives market. On the other hand, ETH’s performance so far this month underscores a bear trap that could explain the current rally.

ETH’s bearish price action in the second week of February was bearish. This may have created a false expectation of more downsides, hence an increase in leveraged short positions.

Source: CryptoQuant

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The chart above indicated an increase in the estimated leverage ratio, which peaked on February 13 before turning around. This pivot marked the end of the recent bearish pullback, after which traders exited their leveraged positions. This confirmed that leveraged short traders exited their positions, which is why short liquidations were on the rise.

The above observation also confirmed that momentum in the market was partly fueled by a short squeeze at the time of writing. So the jury is still out on whether ETH would maintain its momentum.

This post Ethereum [ETH] whales pile up, but is this enough for a level retest?

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