Ethereum’s symmetrical triangle pattern could indicate the formation of a bottom and could lead to further declines before rising. An increase in the leverage ratio and a change in the amount of open interest indicate large fluctuations in the market.
Ethereum (ETH) has experienced significant volatility recently, with the price dropping 10.8% over the past week. After a strong rally that pushed the asset above $2,700 in an attempt to reclaim the $3,000 level, the market corrected and sent Ethereum lower.
The stock is now showing signs of recovery, trading at around $2,389, up about 2.4% over the past day. This price movement has led many to speculate about the next potential trajectory of this asset.
Further decline before a sharp rise
Notably, a prominent crypto analyst known as Trader Tardigrade shared his insights on Ethereum’s potential price movements on X.
According to the analyst, Ethereum may be forming a “symmetrical triangle bottom,” a technical pattern that suggests a possible reversal.
Source: Trader Tardigrade
However, analysts stress that ETH may need to fall first before it can rise significantly.
“ETH may touch the lower support as leg number 5 before completing the bottom formation,” he said, noting that there is a possibility of a decline before the formation ends.
For context, a symmetrical triangle pattern in technical analysis is a chart formation in which prices consolidate into a narrower range over time, forming a shape resembling a triangle.
This pattern often indicates a period of indecision in the market as buyers and sellers vie for control. A symmetrical triangle is characterized by a series of lower highs and higher lows that converge to a point known as the apex.
The end of this formation often leads to a breakout in either the upward or downward direction, marking the beginning of a new trend.
In the case of Ethereum, the observed symmetrical triangle formation suggests a period of consolidation before a definitive move. If the triangle pattern plays out as analysts predict, Ethereum could see a sharp rise in price after touching the lower support.
Ethereum’s key indicators signal big market moves
Beyond technical patterns, it is worth evaluating Ethereum’s market fundamentals. It provides a broader context for its price trends.
One important metric to observe is the “Estimated Leverage Ratio,” a measure that reflects the amount of leverage being used in the Ethereum market.
This ratio is calculated by dividing the open interest (total number of derivative contracts outstanding) by the exchange’s asset reserves. A high leverage ratio suggests increased speculative activity, indicating that traders are using leverage to expand their positions.
Currently, Ethereum’s estimated leverage ratio has increased to 0.366 from 0.341 at the end of last month, according to CryptoQuant data. This increase suggests that traders are increasingly leveraging leverage, which could signal increased market risk and volatility.
Source: CryptoQuant
The higher the leverage ratio, the more pronounced price fluctuations can be. Leveraged positions are susceptible to liquidation if the market moves against the trader’s expectations.
Additionally, Ethereum open interest data from Coinglass showed an increase of 0.81%, bringing the valuation of the indicator to $11.44 billion. Open interest represents the total number of outstanding contracts in the derivatives market.
Source: Coin Glass
Read Ethereum (ETH) price prediction for 2024-2025
An increase in this indicator may indicate an increase in speculative activity and market participation. Conversely, Ethereum’s open interest decreased by 24.17% and now stands at $24.33 billion.
A discrepancy between open interest and volume may suggest that the market is cautious. Traders may be holding back from taking larger positions.
Next: Ethereum retests 2024 bottom range: Will new demand emerge?
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