Ethereum price reaches 1,161 US dollars

Ethereum price reaches 1,161 US dollars for the first time in 3 years: What’s next?

Ether, the proprietary cryptocurrency of the Ethereum blockchain, rose to US$1,161 but then quickly fell back.

The Ether (ETH) price reached the US$1,161 level for the first time since January 2018. Immediately after hitting a new three-year high, ETH slipped below US$900.

Ether rallied on the back of Bitcoin’s momentum. In the past, altcoins have rallied rapidly by Bitcoin Storm after a strong BTC rally. Traders usually call this „alt season“ because many altcoins tend to rise at the same time.

Why did Ether fall and what happens next?

Ether rose after the bitcoin rally, but on-chain data also showed that there was a liquidity crisis on the sell side.

During 2020, ETH reserves on exchanges fell to historic lows. This means that there is a smaller amount of ETH that can be sold on exchanges. Ki Young Ju, the CEO of CryptoQuant, explained:

„It seems that the liquidity crisis on the sell side of $ETH is gradually as severe as in the $BTC market. On $BTC, reserves on all exchanges fell 31 per cent compared to February 2020. On $ETH, reserves on all exchanges fell 20 per cent compared to May 2020.“

However, despite the strong rally to the highest levels since January 2018, Ether quickly saw a decline. There are two main reasons for this correction: the high funding rate and strong sell orders at a key resistance.

According to data from Glassnode, Ethereum’s futures funding rate averages 0.2 percent on major exchanges.

Normally, the funding rate holds at around 0.01 per cent when the futures market is not overheated. Analysts at Glassnode commented:

„Ethereum funding rates are at a record high, averaging 0.2 percent on major exchanges. #BitMEX is leading the way in this regard with a funding rate of over 0.4 percent.“

When the market is overwhelmingly tilted towards buyers or long positions, the likelihood of a long squeeze increases.

The term „long squeeze“ describes a situation where holders of long positions are forced to liquidate their positions when Bitcoin’s price falls. This leads to selling pressure on BTC increasing in a short period of time.

Ethereum outlook according to traders

Trader „Mayne“, said Ethereum declined at the weekly supply level. This is where the ETH price was when the weekly candle opened on Monday. The trader commented:

„For now, a rejection at the weekly supply level EQ. Predicted funding rate and people with leveraged long positions are going crazy. I’m out of leveraged long positions for now.“

Market and on-chain data generally suggest late buyers are being squeezed out by aggressive sellers. As soon as ETH crossed the US$1,100 level, the spot market saw a surge in sell orders.

Alex Wice, one of the top traders on the FTX leaderboard, shared a short position on Ethereum and Bitcoin on social media.

The trader also expressed concerns related to Ethereum’s high funding rate, suggesting that it needs to be reset.