Ethereum Hits Two-Year High, Traders Warned of Potential Volatility
The Bottom Line
Ethereum (ETH) is experiencing strong interest from traders, as recent data suggests. ETH’s funding rates have significantly increased in the wake of the cryptocurrency’s recent value increase. This could be an indication of strong demand for long positions and a precursor to further price growth. However, such an increase also carries risks.
ETH Funding Rates Reach Two-Year High
The recent Ethereum rally over the $3700 mark was accompanied by an increase in the cryptocurrency’s funding rates on various exchanges. According to a pseudonymous analyst from CryptoQuant, this reflects the events before the price boom in 2021. An increase in funding rates for an asset and significantly positive values indicate a strong demand for long positions. This is considered a bullish signal and precursor to sustained price growth.
ETH Value Increases by 59% in the Last Month
The value of ETH has increased by 59% in the last month. At the time of reporting, the price was at $3753, the highest level since December 2021 according to data from CoinMarketCap. Data from Coinglass shows that the recent value increase of ETH has led to open interest in futures reaching a 27-month high. At the time of reporting, open interest was at $12.2 billion, an increase of 71% in the last month.
Risks from High Funding Rates
Although rising funding rates typically accompany a bullish market sentiment, excessively high values can be dangerous. Increased rates raise the risk of long liquidation cascades, which can lead to increased market volatility and unexpected correction movements. This was evident on March 5, after ETH had risen above $3800 before falling to $3400. According to Coinglass data, long liquidations on that day amounted to $135 million.
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ETH on the Spot Market
On the spot market, the accumulation of ETH remained stable above sales. The coin’s key momentum indicators were above their respective neutral lines at the time of reporting. For example, ETH’s Relative Strength Index (RSI) was at 76.50, while the Money Flow Index (MFI) was at 80.16.
Our Assessment
The recent data indicates strong trader interest in Ethereum. The rising funding rates and high open interest could suggest a continuation of price growth. However, traders should also be aware of the associated risks. Excessively high funding rates can lead to increased market volatility and unexpected price movements.
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Sources: Abiodun Oladokun, Ann Maria Shibu, Coinglass, CoinMarketCap, CryptoQuant, TradingView
| Symbol | ETH |
| Coin type | Alt Coin |
| Transaction Speed | Medium |
| Pros |
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| Cons |
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| Price | $3,358.79 |
| 24h % | -2.93 % |
| 7d % | -0.37 % |
| 30d % | 0.65 % |
| 60d % | 34.99 % |
| 1y % | 50.60 % |
| Market Cap | $403,264,562,957.00 |
| Official Links | Website | Source Code |
| Socials | Reddit | X |
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