Ethereum funding rate hits yearly low, signals bearish
The Essentials at a Glance
- The Ethereum funding rate has fallen to the lowest level of the year.
- A negative funding rate signals that short positions dominate, indicating a bearish market environment.
- Ethereum’s trading volume remains stable at around $14 billion, which has so far supported the price.
- A short squeeze could occur if buyers on the spot market absorb the selling pressure.
What is the Funding Rate and Why is it Important?
The funding rate is a key indicator in the futures market. It shows the costs traders must pay to hold long or short positions. A negative funding rate means that short sellers are financing long positions, which indicates a bearish market environment. In the current situation, the drop in Ethereum’s funding rate suggests low interest in long positions, which could put short-term pressure on the price.
Ethereum Funding Rate at Yearly Low
According to data from CryptoQuant, Ethereum’s funding rate has reached its lowest level in 2024. This indicates that demand for leveraged buying of Ethereum has significantly decreased. The drop in the funding rate shows that short positions dominate the market and selling pressure is increasing. If this trend continues, Ethereum’s price could come under further pressure.
What Does This Mean for Ethereum’s Price?
The decline in the funding rate could indicate a further downward movement in Ethereum’s price in the short term. However, if buyers on the spot market emerge in sufficient numbers, this could offset the selling pressure. Should this happen, a so-called short squeeze could occur. A short squeeze happens when short sellers are forced to close their positions, leading to a sudden price increase.
Spot Volume as a Stabilizing Factor
Despite the negative sentiment in the derivatives market, Ethereum’s spot volume remains stable. According to data from Santiment, the average daily trading volume is around $14 billion. This stable volume has so far helped to prevent larger price declines. However, if the spot volume falls below this level, Ethereum could come under further pressure, as fewer buyers would be willing to absorb the selling pressure.
What Could Happen Next?
If the spot volume remains stable or even increases, it could offset the selling pressure from the derivatives market and stabilize Ethereum’s price. A decline in spot volume, on the other hand, could lead to further price drops, as there would be fewer buyers to absorb the selling pressure. It remains to be seen whether a short squeeze will occur or if selling pressure will continue to dominate the market.
Our Assessment
The drop in Ethereum’s funding rate indicates a bearish sentiment in the derivatives market. In the short term, this could lead to further price declines, especially if the spot volume is not sufficient to absorb the selling pressure. However, a stable or rising spot volume could lay the foundation for a recovery. A short squeeze remains a possibility if sufficient demand emerges on the spot market.
| Symbol | ETH |
| Coin type | Alt Coin |
| Transaction Speed | Medium |
| Pros |
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| Cons |
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| Price | $3,160.18 |
| 24h % | 2.53 % |
| 7d % | -4.78 % |
| 30d % | 19.48 % |
| 60d % | 28.48 % |
| 1y % | 61.15 % |
| Market Cap | $380,807,994,216.00 |
| Official Links | Website | Source Code |
| Socials | Reddit | X |
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