Ethereum’s native token, Ether, gained over 4.5% to reach $1,622 on Sept. 12 despite falling to its lowest level in six months the day before.
The Ether (ETH) price recovery occurred as worries about a potential FTX liquidation receded.
Ether market can absorb potential FTX dump
FTX court filings on Sept. 11 showed that the exchange holds $3.4 billion worth of cryptocurrencies, including $1.16 billion in Solana (SOL), $560 million in Bitcoin (BTC) and $192 million in Ether. The defunct crypto exchange has requested a New York court allow it to sell its crypto holdings to refund creditors.
The court will respond to the request on Sept. 12 as some believe that the approval to sell $3.4 billion worth of crypto assets could spark a market crash.
However, researchers at crypto analytics platform Messari argue that FTX will not negatively impact the crypto market, noting that the exchange’s holdings comprise mostly illiquid and locked assets. For example, only $9.2 million worth of SOL gets unlocked per month, which is absorbable by the market.
Also, as Messari explained, FTX’s $353 million BTC holdings are roughly 1% of the coin’s weekly trading volume. That means the market will likely absorb much of the Bitcoin and Ether sell pressure
That perhaps explains why, as of Sept. 12, Ether has recovered the entirety of the losses it suffered a day before.
Short liquidations overpower longs
The Ether market gains on Sept. 12 coincide with a run-up in short liquidations across Ether-linked derivatives.
Notably, Ether liquidated $8.37 million worth of short positions versus $1.66 million in long positions on Sept. 12. Short sellers liquidated their positions by buying the underlying asset. Therefore, the combination of new buyers and short liquidations pushed up the price of ETH.
Oversold bounce
Ether’s daily relative strength index (RSI) dropped below 30 on Sept. 11, which traditional analysts view as an “oversold” zone.
In addition, ETH’s price bounce originated from an important support level of $1,545.
Ether technical analysis for September 2023
Ether’s latest bounce brought its price closer to testing its falling wedge’s upper trendline for a potential breakout.
Related: Bitcoin price must take $26K, trader says after ‘textbook short squeeze’
Falling wedges are bearish reversal patterns characterized by the price consolidating between two descending, converging trendlines. They typically resolve after the price breaks above the upper trendline and rises by as much as the wedge’s maximum height.
As a result of this technical setup, Ether’s decisive close above the upper trendline may lead to $1,740 in September, up over 8% from current price levels. What’s more, the level coincides with ETH’s 50-day exponential moving average (EMA), the red wave in the chart below.
Conversely, a pullback from the falling wedge’s upper trendline risks dropping the ETH price near the lower trendline, around $1,500, for a potential 8% decline in September.
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