Will Bears Dominate ETH Price?

The Federal Reserve’s decision to maintain interest rates at 4.25% to 4.50% on May 7 has notably enhanced the appeal of crypto assets to investors. This development has triggered a bullish trend in the market, pushing Bitcoin to the remarkable milestone of $100,000. Ethereum has also witnessed a rise; however, analysts caution that short-term holders (STHs) may soon look to cash in on their profits. This concern is reinforced by a noticeable decline in key on-chain activities, which may lead to a potential price correction in the near future.

ETH’s MVRV Ratio Signaling Possible Reversal

In the past 24 hours, the cryptocurrency market has experienced a significant upswing. Bitcoin has surged back to the $100,000 mark, a level last seen in February, while Ethereum has exceeded $2,000, bouncing back from earlier losses attributed to geopolitical tensions between the U.S. and China.

Recent data from Coinglass indicates that over $175 million in Ethereum positions were liquidated within this timeframe. Buyers closed about $27 million worth of positions, while sellers faced forced liquidations totaling $148 million. The upward trend in Ethereum’s price has concurrently spurred an 18% increase in open interest, bringing it to a total of $24.8 billion.

Additionally, Ethereum’s recent success can be partially linked to rising interest from institutional investors since April. CoinShares reported consistent inflows into Ether-based ETFs over the past two weeks. The Pectra upgrade, launched on May 7, is also believed to have contributed to this price rally.

Despite the current bullish sentiment, buying demand in the crypto sector might be fleeting. According to IntoTheBlock, the MVRV ratio has dipped to 0.888, indicating that many investors are realizing losses despite rising prices. Such panic selling could potentially trigger more sell-offs and lead to a market downturn.

However, notable institutional investors, often referred to as “smart money,” are actively buying. Wintermute, for instance, made substantial purchases in the last 24 hours, likely aiming to benefit from the price surge and associated market-making fees. Additionally, Lookonchain reported that Abraxas Capital withdrew over 41,000 ETH (valued at $75M) from exchanges like Binance and Kraken. Alarmingly, nearly half of all Ethereum wallets, approximately 65.5 million, remain in a state of loss.

What’s Next for ETH Price?

There seems to be limited selling pressure preventing Ether from dropping below its moving averages, suggesting a robust support for the upward rally. Currently, buyers are maintaining the price near the immediate resistance level. As of this writing, ETH trades at $2,048, marking an impressive 13% increase over the past 24 hours.

Buyers are poised to capitalize on this opportunity to break past the resistance at $2,109. If successful, the ETH/USDT pair may gain momentum, potentially pushing above the $2,500 mark. While there is a minor barrier at the immediate 23.6% Fibonacci level, it is not expected to pose a significant challenge.

Conversely, sellers may attempt to drive the price beneath the moving averages. Should this happen, ETH could fall to around $1,734. Anticipated buying at this level could provide support; however, should that level fail to hold, we could see prices dip further to critical support at $1,542.

With the RSI currently hovering in the overbought zone at level 78, a short-term price correction for ETH seems imminent.