Ethereum Faces Crucial Test As Funding Rates Decline And $3K Level Looms
2025-01-11
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Ethereum has undoubtedly been under pressure despite the recent bullish rally in the broader cryptocurrency market as it struggles to make any major upside move.
A recent analysis by ShayanBTC, a contributor to the CryptoQuant QuickTake platform, has shed light on key factors impacting Ethereum’s performance.
In a post titled “Ethereum Faces Crossroads: Funding Rates and $3K Support Key to Sustaining Bullish Momentum,” Shayan highlights the asset’s struggles to maintain its upward trajectory.
Funding Rates And The Importance Of The $3K Support Level
According to Shayan, Ethereum’s bullish momentum has been significantly challenged by fluctuations in Funding Rates, a key indicator of demand in the derivatives market.
While these rates initially rose during the recent rally in the crypto market, signaling growing confidence, there was a subsequent decline after Ethereum was rejected at the $4,000 resistance level suggesting reduced trader interest and commitment.
Notably, the spike in Funding Rates during the rally pointed to cautious optimism among traders. However, the sharp decline in these rates afterward highlights a waning demand for Ethereum in the derivatives market.
This shift raises concerns about the sustainability of the bullish trend, particularly in light of Ethereum’s inability to breach the $4,000 resistance.
The $3,000 support level has emerged as a pivotal threshold for Ethereum. Shayan emphasized that maintaining this level is crucial for stabilizing the market and potentially reigniting bullish momentum.
A failure to hold above $3,000 could trigger increased selling pressure, leading to a deeper market correction. The analyst wrote:
Overall, Ethereum’s outlook depends on reclaiming higher Funding Rates and defending $3K. These factors will determine whether the market resumes its uptrend or faces further corrections.
Ethereum Market Performance
Meanwhile, Ethereum has continued to demonstrate downward movements, especially as the broader market has recently turned bearish. Over the past week, Ethereum’s market value has dropped by 6.2% bringing its price below $3,500.
However, over the past day, there has been a slight uptick in ETH’s price as the asset records a 0.9% increase. This slight increase has pushed ETH’s price to hover above $3,200 at the time of writing marking a 33.9% decrease away from its all-time high of $4,878 recorded in November 2021.
Interestingly, despite the descent in ETH’s price in the past week, the asset’s daily trading volume has faced an opposite trend over the same period. Particularly, ETH’s daily trading volume has moved from $20 billion last Friday to now sitting at above $26 billion as of today.
Given the current trend in ETH, it is worth noting that this increase in trading volume may be a result of the surge in buying pressure and selling pressure ongoing in the Ethereum market.
Featured image created with DALL-E. Chart from TradingView