Ethereum's Price Plunge Sparks Debate, Short Interest Surges

Ethereum's recent price decline has sparked debate among investors and analysts, with some suggesting that the cryptocurrency may be primed for a rebound. According to a research note by blockchain firm Matrixport, Ethereum's (ETH) price drop to current levels is often indicative of a potential price recovery, as technical indicators such as the Relative Strength Index (RSI) show signs of oversold conditions.

However, the mood around Ethereum remains cautious, with short interest in the cryptocurrency surging by 500% since November 2024 and another 40% in the past week. This increase in short positions suggests that investors are feeling bearish and betting against ETH, but it could also set the stage for a short squeeze that might push the price higher.

Despite the positive technical signals, Ethereum's price has been struggling, even with significant inflows into spot Ethereum exchange-traded funds (ETFs). Inflows of $500 million into spot Ethereum ETFs have not been enough to push the price higher, and it remains far below its all-time high from November 2021. Nevertheless, long-term investors, including groups like the World Financial Liberty linked to President Donald Trump, continue to buy more Ethereum, indicating a belief in its future growth.

Matrixport suggests that several testnet deployments of Pectra in March could act as potential "bullish catalysts" for Ethereum's price. As of press time, Ethereum is trading at $2,715, with its market capitalization staying at $327.5 billion.