Ether drops below $3,800, but traders are unwilling to short at current levels

Even though Ether (ETH) reached a $4,870 all-time high on Nov. 10, bulls have little reason to celebrate. The 290% gains year-to-date have been overshadowed by Dec.’s 18% price drop. Still, Ethereum’s network value locked in smart contracts (TVL) increased nine-fold to $155 billion.

Looking at the past couple of months’ price performance chart doesn’t really tell the whole story, and Ether’s current $450 billion market capitalization makes it one of the world’s top 20 tradable assets, right behind the two-century-old Johnson & Johnson conglomerate.

Ether/USD price at FTX. Source: TradingView

2021 should be remembered by the decentralized exchanges’ sheer growth, whose daily volume reached $3 billion, a 340% growth versus the last quarter of 2020. Still, crypto traders are notoriously short-sighted, accentuating the impact of the ongoing downtrend channel.

Derivatives markets do not reflect panic selling

To understand whether bearishness has been instilled, one must analyze the futures’ funding rate. Perpetual contracts, also known as inverse swaps, have an embedded rate usually charged every eight hours. Those measures are established to avoid exchange risk imbalances. A positive funding rate indicates that longs (buyers) demand more leverage.

However, the opposite situation occurs when shorts (sellers) require additional leverage, and this causes the funding rate to turn negative.

Ether perpetual futures 8-hour funding rate. Source:

As depicted above, the eight-hour fee has been ranging near zero in December, indicating a balanced leverage demand from buyers and sellers. Had there been some panic moments, it would have been reflected on such derivatives indicators.

Top traders are increasing their bullish bets

Exchange-provided data highlights traders’ long-to-short net positioning. By analyzing every client’s position on the spot, perpetual and futures contracts, one can better understand whether professional traders are leaning bullish or bearish.

There are occasional discrepancies in the methodologies between different exchanges, so viewers should monitor changes instead of absolute figures.

Exchanges top traders Bitcoin long-to-short ratio. Source: Coinglass

Despite Ether’s 9% correction since Dec. 24, top traders on Binance, Huobi and OKEx have increased their leverage longs. To be more precise, Binance was the only exchange facing a modest reduction in the top traders’ long-to-short ratio. The figure moved from 0.98 to 0.92. However, this impact was more than compensated by OKEx traders increasing their bullish bets from 1.67 to 3.20 in one week.

Currently, there is hardly a sense of bearishness present in the market. According to the data, pro traders are buying the dip while retail investors’ net demand for shorts (sell) hardly changed throughout the past month. Of course, none of that can predict whenever Ether will flip the current descending channel, but one might infer that there’s little interest in betting on the downside from here.

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk. You should conduct your own research when making a decision.


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These 3 indicators flashed bullish ahead of the recent Bitcoin price pump

In stock markets and the crypto sector, traders are always looking for a definite reason to explain an asset’s price action, which means it’s important to stress that correlation doesn’t imply causation. 

While it may be easy to connect a regulatory statement or pending legislation to the outcome of an asset’s price, there’s not always hard proof that these were the exact drivers. Some indicators described below may have happened due to pure luck, even if the coincidence continues throughout history.

For example, Bitcoin’s (BTC) pump to $48,200 on Oct. 1 could have been related to the Sept. 30 remarks by the U.S. Federal Reserve chairman Jerome Powell. When asked to clarify his comments on Central Bank Digital Currencies (CBDC), Powell affirmed that the FED has no intentions to ban cryptocurrencies.

Another plausible reason for the current rally is Bitcoin’s 7-day average hash rate jumping to 145 exahashes per second (EH/s), its highest level since the abrupt crash in early June when China’s mining crackdown intensified.

Finally, increasing expectations of a Bitcoin exchange-traded fund (ETF) approval by the U.S. Securities and Exchange Commission (SEC) might have played an essential part in traders’ recent bullish bets.

What is clear is that multiple factors could have led last week’s pump to $49,000, and today bulls appear to be making an effort to recapture $50,000. So let’s take a look at 3 indicators that flashed a ‘buy’ signal ahead of the recent price move.

UNI caught a bid after traders turned their attention to DeFi

Uniswap (UNI, left) vs. Bitcoin (BTC, right). Source: TradingView

UNI, the decentralized exchange token for Uniswap, pumped a few hours ahead of the Oct. 1 market rally. The altcoin began its price increase right as the UTC monthly close happened, initially by 5% to $24.20 from $23. This move was followed by another 4% pump to $25.20 three hours ahead of Bitcoin’s breakout above $45,000.

Curiously, DEX volumes started to soar after China imposed additional restrictions on Bitcoin in the previous week. A reasonable explanation for the move could be investors beginning to understand that China’s action would not impact the trading volume. By migrating to DEX, the possibility for governments to control or limit cryptocurrency adoption goes down significantly.

Shorts on derivatives exchanges saw an uptick

Some exchanges provide useful information on clients’ net exposure by measuring their positions or consolidating data from spot and derivatives markets. For example, the OKEx Bitcoin traders’ long-to-short ratio dropped from 1.25 (favoring longs) to 0.72 (favoring shorts) by 28% in less than two days.

That might sound counterintuitive at first, showing whales increasing bearish bets, but when market expectations are broken, extreme price moves tend to happen. Had most traders expected a positive price swing, the result would likely have been priced in already.

OKEx Bitcoin derivatives long-to-short ratio. Source: OKEx

Binance futures open interest grew suddenly

Regardless of the underlying asset, a futures contract has longs (buyers) and shorts (sellers) matched at all times. This means there is no way to anticipate whether those investors are skewed to either side.

However, sudden increases in the open interest, which reflects the aggregate number of contracts still in play, reflects confidence. The higher the notional involved, the bigger the stakes.

Binance Bitcoin futures open interest. Source: Binance

Notice how, during the 4 hours ahead of the 6:00 am UTC bull run, the spike on both the USDT perpetual and the coin-based contract open interest. Interestingly, even with the $400 million additional bets, Bitcoin price was only noticeably impacted after the open interest peaked.

The truth is one might never uncover what exactly triggered the rally, but by monitoring similar patterns in the future, traders may be able to predict price pumps. Of course, there’s no guarantee that all three indicators will repeat themselves, but the cost of monitoring the data is minimal.

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk. You should conduct your own research when making a decision.