Ethereum (ETH) has been trading sideways for a long term now. This made the bears more confident and as a consequence, we saw the number of shorts piling up. The above weekly chart for ETHUSDShorts on Bitfinex explains the whole scenario. A lot of people were expecting a trend reversal around October, but when that did not happen, the bears became more confident. We saw the shorts rising above the 5 Week EMA to reach a new all-time high. Interestingly enough, soon afterwards, the number of shorts started falling with the same pace it had gone up. Currently, the number of shorts has fallen and closed below the 21 Week EMA which means they are only going to go down further in the weeks ahead.
Just like the whales preyed on unsuspecting bulls around the top, they are preying on unsuspecting bears around the bottom. The whales love traders who trade on sentiment because they are soft targets. When they see the price unable to rise for a few weeks, they go to Bitfinex or Bitmex and open a short position. Before they know it, their trades are liquidated by some smart whales that do this for a living. Yes, they take advantage of people who making trading decisions based on sentiment because sentiment does not take long to change. Ethereum (ETH) shorts are now down more than 50% from their all-time high. Given the aggressive price drops, it is clear that a lot of people lost money to liquidated positions. Otherwise, they would not change their minds in such a short time considering nothing special has happened with Ethereum (ETH) in the meanwhile.
Ethereum (ETH) is definitely a good deal at its current price considering where it can go to from here. However, market cycles have a way of creating investors who know the price of everything but the value of nothing. Some may even bet on the price going down further while others may wait and see if the price recovers. However, very few are willing to recognize that Ethereum (ETH) is a bargain at its current price and it may pay off in the long run. Ethereum (ETH) is currently down more than 1% for the day, but this is no way an indication of weakness. When the volume is this low, the price can be manipulated either way. What remains to be seen though is whether the 10 Day EMA can break above the 21 Day EMA.
MACD profile for the above ETH/USD daily chart shows that there is plenty of room for a rally from current prices. The price of Ethereum (ETH) could fall from current levels just as it may rally from here. However, we need to understand the repercussions of a fall below support at this point. If Ethereum (ETH) falls below the trend line at this time, it will have to break market structure. In that case, Ethereum (ETH) will have to enter another long term correction. However, as long as the price remains above the trend line, there is no cause for concern.