Ethereum: $500M shorts wiped, bulls poised – Can ETH retain its stride?

• The Ethereum crossover above the weekly Moving Average has not yet occurred.
• The seller exhaustion constant fell to its 18-month lows, which could be a sign of a low-risk bottom.

Ethereum’s [ETH] short squeeze, on the 16th of June, saw $500 million in short liquidations. The flow of ETH into derivative exchanges was a signal that traders should beware of the potential for a deeper price drop and renewed selling.

Yet, with geopolitical tensions rising, Ethereum continued to trade above $2,400, and Bitcoin [BTC] above $100,000.

The drop in the estimated leverage ratio showed that the volatility earlier this week could serve as a good reset for the futures market, priming ETH for a recovery.

What would be the first sign of an Ethereum breakout?

Source: CryptoQuant Insights

In a post on CryptoQuant Insights, user İbrahim Cosar observed that a decisive rally would first need to move past the 50-period Moving Average on the weekly timeframe.

The November 2024 and October 2023 rallies came after the ETH price breached this moving average.

Source: ETH/USDT on TradingView

The weekly price action showed ETH was coiled below the 50-week Moving Average, unable to climb above this resistance.

A weekly session close would highlight the strong chance of a bullish trend for Ethereum.

Source: Glassnode

The seller exhaustion constant is the product of the percentage supply in profit and the 30-day price volatility. The combination of low percentage supply in profit (high losses) and low volatility would imply a low-risk bottom had formed.

The seller exhaustion constant has fallen below late-2024 levels, matching the January 2024 low. 

This suggests Ethereum may have formed a high-probability bottom, despite trading above $2.4k within a range.

Source: Glassnode

The ETH/BTC SOPR provided insight into the relative profitability of coins spent on both networks.

Consistent values below 1 meant investors realized heavier losses or fewer profits on their spent ETH than their equivalents on BTC.

It implied ETH weakness. The ETH/BTC saw a brief resurgence in April, but the SOPR showed that ETH continued to remain weak relative to BTC.