Ethereum Flashing Bullish Signal After Shapella Upgrade, Says Analytics Firm Santiment – But There’s a Catch

A leading analytics firm says that leading smart contract platform Ethereum (ETH) is flashing a bullish signal after the Shapella upgrade.

Santiment says that a significant number of traders betting against ETH after Wednesday’s upgrade could trigger a bigger move to the upside.

“Another thing to keep an eye on is perpetual contract funding rates. Specifically, Deribit is the exchange that has been showing wild swings between shorts and longs throughout the past three months in particular.

After some longs were popping up on the exchange, the price began to top as expected. But once funding rates became neutral, ETH began to rise alongside BTC. As of now, we are actually seeing quite a bit of disbelief. Shorting is quite prevalent, and this ultimately is a good sign that there could be more liquidations to add a bit more rocket fuel for prices to rise.”

Source: Santiment

The analytics firm is describing a “short squeeze,” which happens when traders borrow an asset at a certain price in hopes of selling it for lower to pocket the difference but when momentum moves against them they rush to cover their losses by buying back the assets, triggering further rallies.

However, Santiment also notes a bearish signal in the number of transactions involving profits, which have not reached as high of a ratio since January 20th, when a market correction followed.

“With ETH jumping above [$2,000], we are seeing the highest spike in the profit vs. loss transaction ratio. There are 2.59 times as many transactions in profit vs. transactions in loss today. And this is the highest ratio since January 20th, when we did see a minor correction following. We do interpret this as a short-term bearish signal, as this heavy profit-taking can temporarily push prices down, historically.”

Source: Sentiment

Santiment also notes that another bearish signal is the number of ETH shark and whale holders who are selling, including those holding between 10,000-100,000 ETH.

“The 10,000-100,000 ETH tier has declined swiftly, and the amount held has dropped to levels not seen since October, 2022.”

Source: Santiment

Another indicator Santiment looks at is ETH’s 30-day market value to realized value (MVRV), which traders use to detect overbought or oversold conditions. The analytics says ETH’s MVRV is high, but not yet at an alarming level.

“We like to look at a 30-day MVRV of 15% or more as a danger zone that indicates a probable sign of a correction. As of now, ETH is at 9.95%. So yes, this MVRV being well over 0 does indicate a higher risk of a drop. But it is not quite at the level where we should be extremely concerned.”

Source: Santiment

Ethereum is trading for $2,106 at time of writing, up 10.5% in the past 24 hours.

Generated Image: Midjourney

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