Key Points
- Ethereum’s Open Interest saw a significant decline in April after failing to break the $3.7k barrier.
- Despite this, on-chain metrics remain healthy, suggesting a potential uptrend.
Ethereum (ETH) was last seen trading at $3.2k. The psychological threshold of $3k has been crossed multiple times since April 13th, indicating a weakened sentiment towards the altcoin.
This was reflected in the sharp decrease in Open Interest for Ethereum. Along with the price patterns over the past few weeks, a downtrend seemed plausible.
Ethereum’s Previous Bull Run
During the previous bull run in mid-February 2021, Ethereum’s price dropped from $1.9k to $1.4k. This was followed by a V-reversal, demonstrating that the futures market can often become overheated.
Impatient investors often aim to quickly profit by going long on leverage. This can be effective up to a point, but eventually, the lack of spot demand and the abundance of longs in the futures market need to be reset.
Recent Developments
The Open Interest’s drop from $10 billion to $7.17 billion in April was likely another such reset. It’s yet to be determined whether a similar V-reversal will occur, especially given the recent selling pressure on Bitcoin.
The weighted social sentiment was highly positive in February and for a few days in mid-March. However, it has largely been negative since then, as prices went into a correction. This sentiment could also be influenced by the high gas fees on the network.
The network growth metric has also slowed over the past three months. An increase would indicate growing demand, but it’s more likely to follow an uptrend rather than precede it.
The 90-day mean coin age has been steadily increasing since March 27th, indicating a network-wide accumulation of Ethereum. However, the 30-day MVRV ratio has been negative for almost a month, suggesting holders are at a loss.
This presents a good buying opportunity, but there remains some uncertainty. If Ethereum can surpass the $3.3k resistance, investors and swing traders will gain more confidence in the potential for continued gains.
