Holders have been curious as to whether ETH price can maintain bullish momentum in December.
Although bullish expectations remain high in light of market recovery, short term pullbacks are expected.
ETH in particular, could be on the verge of a bearish retracement judging by its latest price action.
Bullish momentum has slowed own since the start of December, but more than that, the cryptocurrency appeared to be forming a bearish price-RSI divergence.
ETH bulls continued to hold strong in the last 3 weeks or so. Meanwhile, the RSI has been achieving lower highs, forming a bearish divergence.
Directional uncertainty is usually high at the start of the month. The formation of a bearish divergence after a strong rally signals a high probability that a pullback may occur.
ETH Price: Why Bulls are Still Holding on to Dominance
Despite the bearish expectations, the strong bullish momentum in November raised hopes of more upside in the coming months.
A noteworthy outcome is that investor sentiment may remain strong even when bearish signs appear.
A classic example of such a scenario is the fact that ETH funding rates were mostly positive in November. That trend has remained so in the first 4 days of December.
ETH price did not demonstrate any signs indicating potential sell pressure. This was further supported by the fact that open interest remained high and close to its recent 2024 peak.
ETH demand in the spot market also reflected the outcome of the derivatives market.
It had net positive inflows worth $284.79 million on 4 December, building on $252.69 million observed in the previous day.
Positive spot and derivatives flows indicate that ETH was still able to command heathy demand. This was also backed by positive ETF flows in the last 2 days.
A short squeeze scenario may also be playing out as price soars higher contrary to rising bearish expectations.
Ethereum ETFs added $132.6 million worth of the cryptourrency into their portfolios. This was a build-up from the $24.2 million ETF inflows recorded on Monday.
While these were not the best daily inflows observed recently, they highlighted the fact that the bulls were still dominant.
A Bull Trap in the Making?
The previously mentioned bearish divergence indicates potential downside for ETH price in the coming days. As a result, short positions were likely to rise this week.
Coinglass data revealed that $48.89 million worth of shorts were liquidated in the last 24 hours. Meanwhile, only $14.11 million in long positions were liquidated during the same period.
On-chain data also revealed that large holder outflows were slightly higher than large holder inflows.
According to IntoTheBlock, outflows peaked at 647,220 ETH while inflows peaked at 582710 ETH as per the latest data.
The above data indicates that sell pressure from whales recently outpaced buying pressure from the same category.
This could signal that sell pressure was on the rise, potentially foreshadowing more sell pressure ahead. In summary, a retracement based on the above findings is probable.
However, it is also worth noting that strong demand may disregard the rules of the game, potentially resulting in an unanticipated outcome for ETH price.
