Although Ether (ETH) hit an all-time high of $ 4,870 on November 10, the bulls have little reason to celebrate. The 290% gains for the year have been dwarfed by the 18% price drop in December. But nevertheless, the locked value in smart contracts (TVL, for its acronym in English) of the Ethereum network increased ninefold to $ 155 billion.
Looking at the price performance chart for the past two months doesn’t really tell the whole story, and Ether’s current market capitalization of $ 450 billion makes it one of the top 20 tradable assets in the world, just behind the two-century-old Johnson & Johnson conglomerate.
The year 2021 should be remembered for the great growth of decentralized exchanges, whose daily volume reached 3 billion dollars, a growth of 340% compared to the last quarter of 2020. Even so, cryptocurrency traders are notoriously myopic, which accentuates the impact of the downtrend channel that is ongoing .
Derivatives markets do not reflect panic selling
To understand whether the downtrend has been infused, you need to analyze the futures funding rate. Perpetual contracts, also known as reverse swaps, have an implicit rate that is typically charged every eight hours. These measures are established to avoid currency risk imbalances. A positive finance rate indicates that longs (buyers) demand more leverage.
However, the opposite situation occurs when shorts (sellers) demand more leverage, and this causes the finance rate to turn negative.
As shown in the graph above, the eight-hour rate has hovered close to zero in December, indicating a demand for balanced leverage from buyers and sellers. Had there been some moments of panic, it would have been reflected in these derivatives indicators.
Major traders are increasing their bullish bets
The data provided by the exchanges reveals the net positioning of traders between long and short. By analyzing each client’s position on spot, perpetual and futures contracts, it can be better understood whether professional traders are going bullish or bearish..
From time to time there are discrepancies in the methodologies between the different exchanges, so viewers should keep an eye on changes rather than absolute numbers.
Despite Ether’s 9% correction since December 24, major traders on Binance, Huobi and OKEx have increased their leverage lengths. To be more precise, Binance was the only exchange that faced a modest reduction in the long-to-short ratio of major traders. The figure went from 0.98 to 0.92. However, this shock was more than offset by OKEx traders, who raised their bullish bets from 1.67 to 3.20 in one week.
At present, there is hardly any bearish feeling in the market. According to data, Professional traders are buying lower, while net demand from short (sell) retail investors barely changed over the past month.or. Of course, none of this can predict when Ether will reverse the current descending channel, but it could be inferred that there is little interest in betting lower from here.
Points of view and opinions expressed here are solely those of the Author and do not necessarily reflect the views of Cointelegraph. All investment and trading movement involves risk. You should do your own research when making a decision.
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