Key Points
- Ethereum’s funding rates are at a two-year high, mirroring the events before the 2021 price boom.
- The altcoin’s value has risen by 59% in the last month, reaching its highest price point since December 2021.
Ethereum’s recent surge past $3700 has been coupled with an increase in its funding rates on various cryptocurrency exchanges. A CryptoQuant analyst, who wishes to remain anonymous, notes that this pattern is similar to the events that led up to the 2021 price surge.
Understanding Funding Rates
When there’s a significant increase in an asset’s futures funding rates, it indicates a high demand for long positions. This is typically a bullish signal and often precedes continued price growth.
Ethereum’s value has seen a 59% increase over the past month. As of now, the altcoin trades at $3753, its highest since December 2021, as per CoinMarketCap’s data.
Open Interest and Market Liquidity
Coinglass data shows that Ethereum’s recent value hike has led to its futures open interest reaching a 27-month high. Currently, Ethereum’s open interest stands at $12.2 billion, marking a 71% increase in the past month.
Increased open interest often means traders are either opening new positions or maintaining existing ones, leading to an influx of liquidity in the market. Paired with positive funding rates, this suggests significant bullish activity, with market participants betting on a price rally.
However, this bullish sentiment does come with risks. The CryptoQuant analyst warns that excessively high values can be dangerous as they increase the risk of long liquidation cascades, potentially resulting in heightened market volatility and unexpected corrective movements.
This was evident on March 5th when Ethereum climbed above $3800 before dropping to $3400. Coinglass data indicates that long liquidations on that day amounted to $135 million.
Meanwhile, Ethereum accumulation on the spot market remains steady, outpacing sell-offs. The coin’s key momentum indicators were spotted above their respective neutral lines at press time. For example, Ethereum’s Relative Strength Index (RSI) was 76.50, while its Money Flow Index (MFI) was 80.16.
Furthermore, its Awesome Oscillator, a tool used to measure market trends, showed mostly green upward-facing bars at press time. This suggests that there’s strengthening bullish momentum in the market.
