Can Ethereum break-free from its pitfall with the help of its short-squeeze- The Coin Leaks

Can Ethereum break-free from its pitfall with the help of its short-squeeze?

Ethereum [ETH] saw an enormous drop below the $1,600 mark in relation to the U.S. dollar. ETH was even to below $1,500 as of the time of writing on CoinMarketCap. Any recovery that is greater than $1.5k may be a challenge, however, crossing the mark is still a possibility.

Awakening amid a storm

The most popular altcoin, at the time of writing, was trading at or around the $1.45k mark, after having suffered another 3 percent correction. In this case, ETH hasn’t been able to move over the $1,660 and $1.675 resistance levels. However, a possible price increase remains on the table because of a price squeeze.

It is interesting to note that Ethereum financing rates slowed to their lowest level in the last 14 months, a fact which could signal a brief price drop. A CryptoQuant article by a crypto analyst emphasized the semi-bullish story.

The ETH funding rates were at their lowest since July 2021, the lowest level in 14 months. The negative value indicated that short traders had paid an additional fee to long traders to keep their positions.

The “funding rate” is an indicator of the regular cost that traders on the Ethereum futures market trade against one another.

This drop (despite the negative tone) could be a catalyst for Ethereum’s growth. The last time that Funding Rates were so low it was in July of 21st just prior to an enormous short squeeze on Bitcoin & Ethereum

A short squeeze occurs when the cost of an asset increases dramatically due to many buyers being pressured to exit their positions.

Similar to that, ETH could see a price increase even as the market is still over-leveraged. This could result in liquidation of a huge quantity of shorts. These liquidations push prices upwards, which leads to the flushing down of shorts.

Short sellers are forced to close their positions and sell their positions, a increase in buy order volume occurs. In this way, a short squeeze usually follows the same increase in the volume of trading. That’s exactly what happened as shown in the trading volume of ETH’s Santiment.

In just one day, ETH witnessed trading volumes (interested buyers leaping into) increase by over 26 billion.

Furthermore, the continual attraction of the dominant buyers or whales, also was a major factor in this.

One thing resulted in another

In all likelihood, this continual attention has, indeed create a new demand for the most popular token.

Particularly, in the wake of the highly-anticipated Merge. According to OKLink that amount of ETH that was burned in Ethereum has surpassed 2.6 millions, which amounts to approximately $3.76 billion at present price.

Incredibly, since the introduction of EIP-1559 the annual inflation rate of Ethereum has decreased by 50.77 percent

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