Key Points
- Ethereum’s funding rate has experienced a significant drop, indicating a weakened bullish momentum.
- Ethereum’s price has declined by over 10% over the past week, and the altcoin is struggling to sustain an uptrend.
Ethereum [ETH] has found it challenging to maintain a positive trajectory in recent weeks. The altcoin has experienced severe price volatility while moving sideways.
As of now, Ethereum is trading at $3,232. This represents a 10.08% decrease on the weekly charts, along with an additional 1.85% dip within the last 24 hours.
Ethereum’s Funding Rate Drops
Analysts have expressed concerns about Ethereum’s inability to make any significant gains. For example, Cryptoquant analyst Shayan suggests that Ethereum must maintain its $3k support level to continue an upward trend.
Shayan has also noted that Ethereum’s funding rate has sharply declined since the altcoin was rejected at its $4k resistance. This decrease in funding rate indicates a decrease in demand, thereby weakening Ethereum’s bullish momentum.
As a result, without renewed confidence among investors, it becomes challenging to sustain an uptrend. If the funding rate continues to decline, Ethereum risks dropping below the $3k mark. Therefore, the $3k support level is crucial for Ethereum’s stability and for sparking a northbound rally.
Implications for Ethereum’s Charts
A sharp decline in the funding rate typically means that investors are closing their long positions. In other words, Ethereum’s market sentiment may be shifting towards bearishness.
This weakening uptrend is evident in the declining Relative Vigor Index, which has been dropping over the past four days. This indicates strong downward momentum and a weakening uptrend.
This shift in market sentiment is further evidenced by the increasing demand for short positions. According to Coinglass, most traders have been going short on Ethereum, with 52% of total accounts doing so.
Additionally, Ethereum’s MVRV long-short difference has decreased over the past week to 9.86%. This not only indicates reduced profitability for long-term holders but also a growing lack of confidence among them. When long-term holders lose confidence, they tend to sell.
If the declining funding rate continues and investors maintain a bearish sentiment, Ethereum could potentially drop to $3,160. To maintain the bullish momentum, the $3k support level must hold. If it drops below $3,026, Ethereum could potentially dip to $2,800.
