Volatility often goes hand in hand with speculation, and Ethereum is a clear example of this.
The past 48 hours have been a rollercoaster for the altcoin. According to CoinGlass, nearly $300 million in long positions have been wiped out.
However, this still does not compare to the liquidity squeeze seen earlier in October, which saw almost $500 million of positions liquidated as ETH broke below the $2.5k support level, triggering a 7% correction.
This time, despite erasing nearly $300 million worth of long positions, ETH has corrected by just over 1%. This suggests that selling pressure remains relatively contained, at least for now. Could this mean Tom Lee was right to say Ethereum is close to bottoming out?
As can be seen in the post above, a trader who claims to have a perfect 100% win rate has opened up another long trade on Ethereum. The trader had used 25x leverage to go long on 20,277 ETH for an investment of $45.3 million.
This trade has already resulted in $252,000 of profit. The interesting part is that the trader’s previous 10 trades have all been profitable, resulting in $6.32 million in realized gains.
Given this track record and the fact that ETH has had limited downside despite heavy futures selling, this could be an interesting sign.
It could suggest that the trader is positioning ahead of a potential recovery that the broader market has yet to price in, adding another bullish angle to Tom Lee’s $2k ETH bottom thesis.
That said, the real test may still be ahead.
Ethereum’s bottom call faces a test as supply outpaces demand
The market is still not fully convinced that Ethereum [ETH] has found its bottom.
For starters, on-chain data suggests that uncertainty is also showing up in staking demand, which continues to weaken. According to ValidatorQueue, there are about 1,036,882 ETH (over $2.3 billion) waiting to go into the Ethereum mainnet validator queue.
This is a considerable drop compared to 3,737,802 ETH six months ago, suggesting fewer investors are looking to lock up their ETH for staking rewards.
Meanwhile, institutional sentiment remains negative. Over the past five weeks, there have been continuous outflows from Ethereum ETFs, with $270 million in net outflows already recorded in less than a week since November began.
If this trend continues, November could see outflows exceed October’s $1.6 billion, putting further pressure on ETH and its recovery prospects.
Unless these factors start to improve, calling an Ethereum bottom could be premature.
For now, ETH remains exposed to further downside. Long positions are building despite fading technicals, weakening interest in staking demand, and increased ETF outflows.
On top of this, a large long-liquidation cluster exists below $2200 ETH. If overall sentiment remains weak, ETH could sweep this liquidity, potentially falling below the $2k level before a potential reversal.
This suggests that the market may need another round of downside before Tom Lee’s bottom thesis gets stronger support.
Final Summary
A big Ethereum trader is betting on a recovery despite recent market volatility.
Falling staking demand, ETF outflows, and liquidation risks could push ETH below $2,000.