Ethereum has been exhibiting a robust and sustained upward trend, showing its mettle in the volatile cryptocurrency market. At the time of writing, the price of ETH was hovering around $3,743, surpassing its moving averages with considerable bullish momentum.

The cryptocurrency community is now eagerly anticipating the breach of the significant $3,500 price threshold, marking a potential milestone for Ethereum’s continued ascent to the highly-coveted $4,000 price tag.

Notably, the current price has surged well above the 50-day moving average, which stands at approximately $2,700, underscoring the strength of the ongoing bullish trend. Furthermore, the 100-day moving average, situated at $2,400, serves as another crucial support level. Historically, these key supports have proven instrumental in propelling Ethereum prices higher upon retesting.

ETH Surge: Price Correction In The Offing?

Ethereum (ETH) surged alongside Bitcoin (BTC) on February 28th, reaching within spitting distance of its all-time high of $3,500. While bulls celebrate, a technical indicator hints at a potential pause in the rally.

The CryptoQuant Funding Rates metric, reflecting fees paid in perpetual futures contracts, reveals a significant spike for ETH on February 28th. Reaching 0.07%, it marks the highest level since April 2021, exceeding the 0.06% peak observed before ETH’s previous peak of $4,800 in November 2021. Historically, such surges in funding rates have often preceded price corrections.

Source: CryptoQuant

The high CryptoQuant Funding Rates not only suggest a potential pause in the rally but also raise concerns about the sustainability of the current momentum. Typically, such dramatic surges indicate excessive bullish sentiment and overheated markets fueled by highly leveraged long positions.

Crypto market cap now stands at $2.27 trillion. Chart: TradingView.com

There are two reasons why this scenario is extremely complex. First off, in the event that prices turn around, it exposes bulls to significant losses. Second, it raises the possibility of a long squeeze, an uncommon situation in which strong short-term selling pushes holders of long positions to liquidate, thus quickening the price decrease.

ETH up 16% in the weekly chart. Source: Coingecko

Imagine a domino effect: leveraged long positions get called upon margin calls, forcing liquidation, which triggers further selling, pushing prices down further, and causing more margin calls. This cascading effect can lead to panic selling and significant losses for overly optimistic investors.

Although there is no assurance that a prolonged squeeze will occur, the increased funding rates serve as a harsh reminder of the inherent risks that are associated with chasing a highly stretched rally.

???? A dormant pre-mine address containing 72 #ETH (243,771 USD) has just been activated after 8.6 years!https://t.co/K8769uQJ0w

— Whale Alert (@whale_alert) February 28, 2024

Old Ethereum Whales Reappear, Sparking Crypto Speculation

In another development, a pre-mine Ethereum wallet that had remained inactive for almost nine years has been reopened, according to data released by the cryptocurrency tracker Whale Alert. It has 72 ETH valued at $243,771 in it.

This tracking platform discovered that these 72 ETH funds had been moved to another anonymous cryptocurrency wallet. In addition to this wallet, according to recent sources, a number of dormant Ethereum whales awoke in February and held premined Ethereum worth 100 ETH, 429 ETH, 3,465 ETH (valued at roughly $10.4 million), and 100 ETH. They had all been dormant for about nine years.

Featured image from Pixabay, chart from TradingView

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