Ethereum Market Turns Optimistic: Funding Rates Hint At Potential $4K Comeback
2024-12-31
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Amid the broader decline in the global crypto market, Ethereum emerged as one of the major cryptocurrencies that has been impacted significantly.
Despite already being underperformed in the recent bull run, Ethereum has now experienced a notable correction, dropping to as low as below the $3,500 price level in recent weeks.
While this price performance from ETH might have led investors to lose interest in Ethereum for now, recent data from the CryptoQuant platform suggests a possible turnaround, with key indicators pointing towards renewed market confidence.
Funding Rates Indicate Renewed Confidence Among Traders
A CryptoQuant analyst, ShayanBTC, highlighted Ethereum’s futures market developments in a recent analysis titled “Ethereum Futures Market Signals Potential Rebound After $3K Correction.”
The analysis from Shayan reveals that the futures funding rates, which act as a sentiment gauge for traders, have shown signs of stabilization after the price drop, hinting at a potential recovery.
According to the analyst, Ethereum funding rates have shown an increase after the recent sharp correction, indicating a higher appetite among traders for long positions.
Notably, funding rates are a mechanism in perpetual futures contracts where traders holding long positions pay short sellers, or vice versa, depending on market sentiment. When funding rates rise, it typically suggests that traders are leaning towards a bullish outlook.
Shayan disclosed that the spike in funding rates implies increased demand for Ethereum at its current price level, signaling that traders expect a bounce-back from the $3,000 region.
The analyst further explained that such behavior often precedes significant upward price movements, particularly when combined with a period of market consolidation. In his words:
The recent spike in funding rates suggests an influx of buyers, which, if sustained, could drive a substantial bullish rebound. This renewed buying pressure has the potential to push Ethereum toward the crucial $4K resistance in the short to mid-term.
Ethereum Market Performance
After weeks of consistent decline, Ethereum currently trades at a price of $3,310, at the time of writing down by 1.5% in the past day. This market price marks a 32.2% decrease away from its all-time high (ATH) of $4,878, recorded in November 2021.
Interestingly despite the drop in ETH’s price, the asset has still managed to see a slight increase in trading volume in the past day.
Particularly, as of this time yesterday, ETH’s daily trading volume stood at a valuation below $15 billion, however, at the time of writing, the asset’s daily trading volume valuation sits at $20.6 billion.
Featured image created with DALL-E, Chart from TradingView