Ethereum, the world’s second-largest cryptocurrency by market capitalization, has been on a rollercoaster ride in recent weeks. While its price surged from $3,200 to $3,700, indicating bullish momentum, several on-chain metrics and market indicators suggest a potential lack of conviction and a short-term price depression.
TLDR
- Ethereum’s price recently surged from $3,200 to $3,700, but faced resistance at the latter level, indicating a lack of bullish conviction.
- The Coinbase Premium Index showed that US investors were not enthusiastic about Ethereum’s rally, suggesting a lack of bullish sentiment from a key market.
- On-chain metrics like the ratio of daily transaction volume in profit to loss, daily active addresses, and network growth indicated a potential short-term price depression.
- Ethereum’s market depth, which measures the volume of buy and sell orders, hit a multi-year high, suggesting improved liquidity and trading activity.
- The open interest in Ethereum perpetual futures contracts reached an all-time high, indicating heightened interest from traders and investors.
One of the key indicators that raised eyebrows was the Coinbase Premium Index, which represents the difference in prices between Binance and Coinbase. The index fell since April 5th, suggesting that Binance ETH prices were higher than those on Coinbase. This is a significant observation as US investors, who cannot trade on Binance, rely on Coinbase. The declining index implies a lack of bullish enthusiasm from US investors, despite Ethereum’s sharp bounce to $3,700.
On-chain metrics from Santiment, a leading crypto analytics platform, painted a mixed picture. The ratio of daily on-chain transaction volume in profit to loss leapt to 3.01 on April 8th. However, since February, this metric has faced a glass ceiling at 3, indicating potential resistance to further upside. Traders are advised to keep an eye on this metric’s daily readings to gauge the possibility of a short-term price depression.
Not sure why the #Ethereum price is up today?
Let's get you caught up. 🚀🧵 pic.twitter.com/ONeIlXieQw
— Cointelegraph (@Cointelegraph) April 8, 2024
Daily active addresses and network growth metrics also saw a slump on March 30th, continuing to trend lower over the past ten days. This lack of user adoption and organic demand for Ethereum raises questions about the short-term sentiment in the spot and futures ETH markets.
Adding to the bearish signals, the open interest in Ethereum futures contracts took a turn south when ETH faced rejection at $3,700. Over the last 36 hours, the open interest fell from $10.6 billion to $9.72 billion. A drop in prices, alongside the open interest, is typically seen as a sign of bearish sentiment.
However, amid these mixed signals, Ethereum’s market depth, which measures the volume of buy and sell orders across exchanges, hit a multi-year high. The 2% market depth, which stood at a yearly low of $255 million in October, surged to a staggering $400 million at present. This indicates a resurgence of market makers, who facilitate trading by providing liquidity, and suggests that traders are benefiting from improved market conditions with more opportunities for buying and selling ETH.
The open interest in perpetual futures contracts for both Bitcoin and Ethereum surged to unprecedented levels in USD terms. Trading in perpetual contracts has shown steady growth since the start of the year, hitting a two-year peak in early March and subsequently surpassing previous record highs. This underscores a sense of heightened interest in the assets among crypto market traders and investors, adding to the bullish narrative surrounding Ethereum.
