Ethereum Price At Crossroads As Volatility Risks Loom

Ethereum price recently hovered in a sensitive area, especially with the price pushing above $2,600. This was because it recently interacted with a descending resistance line that was part of its wedge pattern.

The resistance retest paved the way for two potential Ethereum price outcomes. It could either achieve a bullish breakout or capitulate in favor of a retracement.

It is worth noting that Ethereum price has been ranging between $2,400 and $2,700 in the last 3 weeks as the bulls and bears faced off.

While the scenario underscored the bull’s inability to sustain a strong momentum, it also signaled that ETH holders were not selling aggressively. A sign that they were still confident of ETH’s ability to extend recovery.

In addition, ETH has been moving deeper into the wedge pattern’s tight squeeze zone, raising the expectations of a drastic directional move. But which direction will price likely lean?

Can Ethereum Price Pick a Side Based on Exchange Reserves Pattern?

Earlier this year, it was seen that ETH exchange reserve support and resistance patterns significantly influenced price movements. If that remains the case, then it may offer insights into ETH’s next possible move.

Ethereum exchange reserves retested a 3-month support on Wednesday. It has since bounced back slightly in the last 24 hours, revealing that the rate of ETH flows onto exchanges was on the rise.

The pivot was in line with the balance between exchange inflows and outflows, with the former outpacing the latter in the last 24 hours. This suggests that ETH could be headed for more selling pressure in the coming days if market conditions remain constant.

In addition, the rising sell pressure came at around the same time that the market sentiment had been cooling down.  Ethereum demand from institutions has mostly remained positive for the most part in the last 7 business days.

BlackRock remained the most dominant buyer, and this may have helped sustain short-term confidence despite declining sentiment. This was aided by the rising on-chain activity, which could potentially inject some confidence into the market.

But were these observations enough to offset potential downside risks associated with rising sell pressure?

ETH Price Risks High Volatility and Potentially Large Liquidation Event

While a directional outcome was still a toss-up, market data highlighted the possibility that the directional outcome could be extremely pronounced.

For example, ETH open interest has been rising aggressively in the last 4 weeks. It peaked at the tail end of May and remained high at around $35.8 billion at the time of observation.

The high levels of open interest suggest that a directional spike could potentially trigger heavy liquidations. This could, in turn, force a short squeeze if prices rally higher or a long squeeze if a bearish outcome occurs.

The possibility of a bearish outcome was on the rise at the time of observation. This was due to the fact that spot outflows approached $200 million in the last 24 hours at the time of observation.

There was also a 10.42% spike in derivatives volumes, suggesting that the ball was in motion for ETH. In other words, the price was likely to break out of the short-term range in the coming weekend.

Still on the prospects of a bearish outcome, the market sentiment has been cooling down due to investor expectations of more economic disruption. However, it is worth noting that the wedge pattern squeeze zone could also limit ETH’s potential downside.

The possibility of an Ethereum price recovery towards $3,000 before the end of June was still high. Besides, with the likes of BlackRock regularly pumping liquidity into ETH, the investors remain optimistic.

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