Can derivatives traders enable Ethereum’s rise to $4400 and beyond

Ethereum

So far, October has been a pretty intriguing month for Ethereum. Strictly speaking, from the price point of view, ETH has been making higher highs on the charts. Despite this, the asset valuation was unable to exceed its May highs of $ 4.4,000.

The last couple of days have, in fact, been quite monotonous. After noticing a 2.5% daily rise, ETH was trading at $ 4.1,000 at the time of writing.

Risky bets

At this point, derivatives traders are taking a lot of risk. The overall leverage ratio has hovered around its local peak lately. Now it indicates one of the following:

Traders are either very confident about the asset’s price rallying, or two, they’ve given in to greed and merely want to make profits at this point. Whenever this ratio has peaked in the recent past, the price of Ethereum has reacted in a different way.

The current level [0.13] was observed in early September before this and the alt’s price fairly rose at that point. Post that, however, a slight downward deviation in the price triggered massive sell-offs and the same ended up driving the price of the asset down even further.

Nevertheless, in July when the leverage ratio was this high, ETH’s price was at its local peak. After that, as the price of Ethereum rose, traders stayed in the market, but exercised caution. In effect, the leverage slowly started draining out.

Evaluate which scenario could play out this time

Well, looking at the current state of the derivatives market would help draw a plausible conclusion about where the ETH market is heading. The OI has quite evidently been surging of late, indicating the brewing interest of derivative traders.

As can be seen from the attached table, the IM revolved around its ATH. This essentially meant that more capital was being diverted into the Ethereum market now, than ever – which is fairly a good sign.

However, if the chart is well observed, it can be seen that after the peak OI phases, the price of Ethereum has declined. Thus, even if the alt rallies in the coming trading sessions, the odds of it undergoing a substantial correction is quite high at this point.

Also, over the 4 hour window, ETH liquidations were pretty minimal. So, as long as no mass liquidations take place, ETH would likely tread on the second path. However, if the bullish sentiment were to fade, a scenario similar to September would unfold.

Double-check

As far as the spot market is concerned, ETH’s volumes have gradually been on the rise. ITB’s side transaction measure showed that the number of buy transactions exceeded the number of sell transactions by a substantial margin. In the past 12 hours alone, for instance, over 4k additional tokens have been bought than sold.

In addition, net foreign exchange flows that were positive until recently have started to turn negative, highlighting buying bias. Market participants buying tokens at this stage underlined the fact that they were quite keen to see Ethereum’s price inch past its previous highs.

So, if the same momentum persists, the price of ETH would likely end up inflating over the next few trading sessions. However, if bears and short traders manage to grapple and gain control, the largest alt’s price might end up undergoing a correction phase before rising further.

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