Crypto Crash: ENA Plunges 21% Amid Short Squeeze Fears

Ethena, a cryptocurrency with the ticker symbol ENA, has been experiencing a significant downturn in recent days. At the time of this report, ENA was trading at $0.715, marking a 14% decline over the past 24 hours. This drop extends a seven-day losing streak, with ENA's price falling by 21%.

The bearish trend has created an unusual situation in the futures market, with ENA's Funding Rates plummeting to -42%. This negative rate suggests a high demand for short positions, as traders bet on further price declines. Meanwhile, traders taking long positions on ENA are being paid by exchanges to maintain their positions, which could potentially signal an impending bullish reversal.

An influx of short positions in the market, while bearish, could lead to a short squeeze scenario. If ENA's price were to suddenly reverse and trigger a short liquidation event, the forced closure of these positions would create buying pressure, causing the price to rally.

Despite this potential bullish outlook, ENA's daily chart indicates that bears remain in control. The altcoin is currently trading within a descending parallel pattern, which is an indication of a bearish trend. At the time of writing, ENA had breached the midline of this pattern, and a drop below the lower trendline could accelerate the downtrend.

The price decline appears to be driven by selling pressure, as the Relative Strength Index (RSI) has dropped to 35 – its lowest level since early September. This rapid surge in selling activity is further highlighted by the negative On-Balance-Volume (OBV) indicator, which shows that traders are not buying the dip, and selling pressure outweighs buying pressure.

For a bullish reversal to occur, ENA needs to break the resistance level at the 0.5 Fibonacci level ($1.017). A breakout from the upper trendline could stir gains toward $1.31. Additionally, an upsurge in network activity, as indicated by an increase in daily active addresses, could aid an uptrend for ENA. However, at the time of this report, network usage was on a decline, which could exert further downward pressure on the price.