Is short compression next?

Ether (ETH) bounced back above $2,000 on Friday, and the gains were extended after the US Consumer Price Index (CPI) print was weaker than expected.

The recovery put ETH/USD on track for its first weekly candle close since mid-January, fueling speculation that it could rally towards the $2,500 level.

Main Receptors:

Ether Futures open interest fell by 80 million ETH in 30 days, and funding volume reached a three-year low, indicating a weakening trend.

The price of ETH has established strong support around $2,000, a level to secure a recovery.

Ether's open interest will be reduced by 80 million ETH

According to CryptoQuant data, Ether futures open interest (OI) on all major exchanges has decreased by more than 80 million ETH in the last 30 days.

Binance, trading volume, the world's largest cryptocurrency exchange, recorded a significant decrease of about 40 million ETH (50%) in the last 30 days.

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Ether's OIA on Gatecoin fell by more than 20 million ETH (25%), while Bybit and OKX saw declines of 8.5 million ETH and 6.8 million ETH respectively. In total, the four major platforms saw a total drop of about 75 million ETH, while other platforms accounted for the remaining five million ETH, confirming that the phenomenon was widespread and not limited to one exchange.

This indicates that bullish traders are reducing their exposure rather than opening up new positions, CryptoQuant analyst Arab Chain said in a Quicktake analysis.

This significant reduction in OI during the fall in prices can be seen as a “clearing of weak spots, thereby reducing the likelihood of subsequent forced liquidity,” the analyst added.

“This environment could pave the way for a period of relative stability or a stronger price base for Ethereum in the near term.”

Ether futures on Binance plunged into negative territory at -0.006, marking the lowest value since early December 2022.

“This shows that bearish sentiment has reached a high level not seen in the last three years,” CryptoQuant contributor CryptoOnchain said in a quick analysis on Thursday.

Historically, extremely negative currency rates often precede short squeezes at key price support levels.

“When the public believes that the price will fall further, the market will go in the opposite direction to eliminate bears of late,” the analyst said.

Current data suggests that we may be looking at a classic imaging event that reflects a late 2022 bottom formation, creating a rapid recovery.

As Cointelegraph reports, Ether's increasing network activity and increasing influx of institutional investors are significant tailwinds for any short-term ETH price gains.

ETH Price Technicals: Bulls should keep Ether above $2,000

The ETH/USD pair has broken out of a falling wedge on the four-hour chart to trade at $2,050 at the time of writing.

The target for the falling wedge, calculated by adding the peak height of the wedge to the $1,950 breakout point, is $2,150.

Above that, the price may rise to retest the 100-time simple moving average (SMA) at $2,260 and then $2,500.

As shown in the chart below, the psychological level of $2,000 is the key area occupied by the 50-period SMA.

Glassnode's cost base distribution heatmap shows a significant support area recently established between $1,880 and $1,900, with investors gaining approximately 1.3 million ETH.

As Cointelegraph reports, Ether stock addresses have seen daily gains increase as ETH fell below $2,000 last week, giving strong investor confidence in its long-term potential.