Last week was a roller coaster ride of emotion for Ether (ETH) traders as there were seven four hour candles with prices moving 10% or more.
It is more, The recent 30% decline to $ 920 resulted in settlements of $ 550 million for long futures contracts. To further complicate matters, this current price correction takes place just four weeks before the start of the CME’s ETH futures.
Even the most bullish Ether traders may not have expected an 85% rally to take place in just eight days. In that short period of time, the senior altcoin broke the $ 800 resistance and quickly rose to $ 1,350, which is only 5% below its all-time high.
In 2017 Ether’s rapid surge to $ 1,400 was largely aided by the initial coin offering (ICO) boom, but this time other factors drove the price of Ether up. Many DeFi platforms are based on the Ethereum network, and Ether is the most common gateway used as a gateway to such platforms. In addition to the increase in activity on the Ethereum network Increased usage has also resulted in high transaction fees.
There isn’t much negative news from the Ethereum camp or the mainstream media right now. The data shows that the ether fundamentals are still going strong and investors are excited about new developments in the Eth2 network.
P.To understand whether the recent decline represents a potential local cap, investors should analyze the Ethereum network usage metrics. A good start is evaluate the transactions and the transferred value.
The graphic above shows that The indicator exceeds $ 8 billion in daily transactions, up 200% from the average of $ 2.6 billion last month. That remarkable increase in the number of transactions and the value transferred is synonymous with strength. and suggests that the price of ether above $ 1,000 is sustainable.
Exchange withdrawals indicate whale formation
The increase in withdrawals from exchanges may be due to several factors including the Stake, the return and buyers who send the coins to the cold store. Typically, a steady stream of net deposits indicates a willingness to sell in the near future. On the other hand, the net withdrawals are generally related to the periods of whale gathering.
From January 4th to 11th, the exchanges recorded net withdrawals of 460,000 ETH. This move suggests a possible accumulation of whales putting their money in cold purses or in the DeFi ecosystem.
This move contradicts the usual expectation that whales will be quick to deposit on the exchanges as ether nears its all-time high. In addition to a net deposit of 100,000 ETH on January 10, the trend towards withdrawing funds from exchanges has prevailed since mid-December 2020.
The futures premium is still unusually high
Professional traders tend to dominate longer-term futures contracts with fixed expiration dates. By assessing the spending gap between futures and the regular spot market, a trader can determine the level of optimism in the market.
Three-month futures generally have to be traded at a premium of 1.5% or more compared to regular spot exchanges. Any time this indicator goes away or turns to the negative side, it is a sign of concern. This situation is known as Backward movement and indicates that the market is turning bearish.
The graphic above shows that The indicator fluctuated between 3.5% and 6%, which is reflected in a moderately bullish mood. The current rate of 4.5% corresponds to an annualized premium of 19% and is well above the neutral threshold of 6%. This shows that despite its recent drop below $ 1,000, professional traders are still confident that Ether has price potential.
The spot volume remains strong
In addition to monitoring futures contracts, the most profitable traders also track volume on the spot market. Small amounts usually indicate a lack of confidence. Significant price changes should therefore be accompanied by strong trading activity.
Last week, Ether averaged an impressive trading volume of $ 6.7 billion, a significant increase from previous weeks’ levels. Despite the current decline, trading activity around the recent high is a positive sign.
Option sales / purchase relationship
By measuring whether there is more activity through call options or put options, the general market sentiment can be determined. Generally, call options are used for bullish strategies, while put options are used for bearish strategies.
A sell / buy ratio of 0.70 indicates that the open interest of the put options is 30% behind that of the more bullish put options and therefore Market sentiment will be bullish.
There is currently no evidence that investors have moved to more neutral, bearish strategies (put options) as the indicator is 0.77 and favors call options. This trend continued over the past week as investors continued to open new bullish positions.
This is very encouraging when you consider that Ether has increased 38% since Jan 4th to hit its high of $ 1,350. It is important to monitor how the strong correction today will affect these bullish signs in the future.
Like Bitcoin (BTC), Ether continues to have positive fundamentals during the current sell-off, suggesting that there is a good chance that the uptrend has not been affected.
The views and opinions expressed here are solely those of automobiler and do not necessarily reflect the views of Cointelegraph. Every investment and business move is associated with risks. You must do your own research when making a decision.