As a result of the recent pullback in the cryptocurrency market over the weekend, Ethereum (ETH) has created two Chicago Mercantile Exchange (CME) gaps at $3,000 and $2,600. Crypto analyst Ted suggests that a short squeeze could soon push the price beyond $3,000, potentially filling these two CME gaps.

Is An Ethereum Short Squeeze Imminent?

Over the past two weeks, Ethereum has lost $70 billion in its total market capitalization, leaving it with a market cap of $268 billion at the time of writing. According to data from the Binance crypto exchange, ETH reached a low of $1,993 on March 4.

Although Ethereum is currently trading in the low $2,000 range, analysts believe that a short squeeze could benefit ETH bulls. Ted took to X to share his analysis on ETH’s current price action.

The analyst pointed out that ETH has two significant CME gaps to fill in the short term: one at $3,000 and the other at $2,600. Ted also noted that since Q1 2024, ETH has filled all CME gaps, so it wouldn’t be surprising to see these gaps filled soon.

Excessive bearish sentiment surrounding ETH could be the catalyst that triggers a massive short squeeze. The analyst explained:

I think we could soon see a massive short squeeze, which will fill the first CME GAP. After that, there could be some consolidation before ETH heads higher.

For the uninformed, a CME gap refers to the price difference that occurs on Ethereum futures contracts traded on the CME when the market closes for the weekend and reopens at a different price. Traders often watch these gaps, as ETH historically tends to “fill” them by revisiting the price level where the gap occurred.

Similarly, a short squeeze occurs when traders who have bet against an asset are forced to buy back their positions as the price rapidly rises due to unexpected bullish momentum. This surge in buying pressure can further drive up the asset’s price, forcing liquidations and potentially even higher prices.

Multiple Bullish Signs For ETH, But Sentiment Needs To Improve

Fellow crypto trader Merlijn The Trader’s analysis appears to align with Ted’s. The trader noted that the ETH Relative Strength Index (RSI) is at a “critical level,” highlighting that every time the digital asset has entered this zone, a significant move followed.

Other positive signs, such as a bullish divergence, also seem to suggest a potential upward move for Ethereum. However, it would be prudent to wait for similar bullish indicators to develop on longer timeframes before entering the market.

While these indicators may point toward a potential rally in ETH, the overall sentiment surrounding the digital currency continues to be in the doldrums. At press time, ETH is trading at $2,221, up 1.4% in the past 24 hours.

Featured Image from Unsplash.com, Charts from X and TradingView.com

Since the beginning of this year, Ethereum has underperformed compared to major digital assets in the market. ETH’s underperformance has sparked concerns within the community, with traders finding it difficult to determine whether the altcoin is gearing up for a major rally or further downside pressure. However, current price action shows that ETH might be set for a price rebound in the short term.

Chart Pattern Hints At A Recovery For Ethereum

In an X (formerly Twitter) post, Ali Martinez, a seasoned technical expert and trader, highlighted a bullish development in the Ethereum chart. The expert has pointed out the formation of a key chart pattern, which could reignite upside momentum and push ETH toward key resistance levels.

Delving into Ethereum‘s recent price action, a Parallel Channel pattern has emerged in the 1-day time frame. Specifically, a parallel channel is a technical chart pattern created by connecting highs and lows with two parallel trendlines. This chart formation helps investors and traders determine the potential entry and exit points in a cryptocurrency’s price.

Presently, Ali Martinez noted that the altcoin is testing the lower boundary of the key pattern, where it may secure enough strength to transition to the upside. In the event that the pattern triggers a bounce for ETH to reclaim the $2,350 level, it will fuel a strong recovery toward $3,000 and $4,000.

As the asset tests the pattern’s lower boundary, it shows that ETH is at a pivotal junction as it gears up for its next move. With ETH hovering near key resistance levels, bullish momentum continues to build, raising the possibility of a rebound for a crucial breakout.

Investors Cut Back Their Exposure To ETH

Amid the bearish movements, on-chain data is showing a decrease in ETH exposure among investors. A recent report from on-chain data and financial platform Glassnode reveals that Ethereum investors actively managed their exposure during this turbulent period.

Ethereum retraced to the $2,050 area following a surge to about $2,500, levels last seen in November 2023, probably contributing to the current shift in investors’ behavior. Looking at Glassnode’s chart in the 3-month view, there is robust engagement from investors with an initial cost basis at the $3,500 mark. 

Data shows that these holders diligently reduced their exposure throughout February as they stepped in at the local top at $2,500 and the bottom at $2,050. Furthermore, these holders have reduced their initial cost basis by about 10% and currently hold over 1.75 million ETH at $3,200.

Even as Ethereum’s price declines, this trend has continued. On March 1, Glassnode noted that 500,000 ETH were purchased at $2,200 but were promptly redistributed at the $2,500 local top.

Meanwhile, the $2,800 mark is the first major resistance barrier, where 800,000 ETH has been accumulated. Glassnode expresses much importance to this level as a price recovery is likely to occur in this area.

Featured image from Unsplash, chart from Tradingview.com

Ethereum is trading at low levels after failing to reclaim the $2,500 mark, leaving the market uncertain about its next move. Analysts remain divided, with some calling for a continued drop as ETH’s price action remains unstable, while others see signs of a potential recovery forming at key support levels.

Top analyst Ali Martinez shared on-chain data from Glassnode, revealing that the number of Ethereum addresses holding more than 10,000 ETH has dropped to 919, down from 999 in late February. This suggests that whales have been selling heavily during the latest correction, likely driven by fear and liquidity issues. The capitulation of big players is often a bearish sign, signaling uncertainty among institutional investors and raising concerns about further downside risk.

Despite this wave of selling, Ethereum has held a key demand level around $2,200, suggesting that a potential reversal could be forming. If ETH manages to stabilize at this level, it could build momentum for a rebound in the coming weeks.

The next few weeks will be crucial for ETH’s price action. If bulls regain control, Ethereum could attempt another push toward $2,500 and beyond. However, failure to hold current levels could result in another leg down, extending its bearish phase and keeping traders on edge.

Price Action Details: Key Levels To Watch

Ethereum (ETH) is currently trading at $2,300, stuck in a range after failing to hold above $2,500 or break below $2,000. The market remains uncertain, with volatility swinging ETH’s price up and down, preventing a clear trend from forming.

For bulls to confirm a recovery rally, a push above the $2,500-$2,600 range is essential. Reclaiming this zone would signal strong buying momentum, potentially shifting sentiment back in favor of bulls. Without this move, Ethereum remains at risk of continued consolidation or another leg down.

However, for now, the main focus is on holding the $2,200 demand level. This key support zone has kept ETH from breaking lower, but if it fails, selling pressure could intensify, pushing Ethereum toward sub-$2,000 levels.

With market uncertainty still high, traders are watching whether ETH can stabilize above $2,200 or gain momentum toward higher resistance levels. Until Ethereum breaks out of its current range, volatility is expected to continue, keeping both bulls and bears cautious about the next major price move.

Featured image from Dall-E, chart from TradingView