Ethereum price tumbles to $915 but traders are bullish for 4 key reasons

The past week has been an emotional rollercoaster for Ether (ETH) traders as there were seven 4-hour candles of a 10% or larger price movement.

Verder, the most recent 30% dalen tot $920 triggered $550 million in liquidations on long futures contracts. To complicate things even further, this current price correction is taking place just four weeks ahead of the launch of CME ETH futures.

ETH/USD 4-hour chart. Bron: TradingView

It’s possible that even the most bullish Ether traders did not expect an 85% rally to occur in just eight days. During that short timespan, the top-ranked altcoin blasted through the $800 resistance and quickly climbed to $1,350, which is only 5% onder zijn hoogste punt ooit.

In 2017, Ether’s swift climb to $1,400 was primarily backed by the ICO boom, but this time a different set of factors drove Ether’s price higher. Many DeFi platforms rely on the Ethereum network, and Ether is the most common asset used as the gateway to these platforms. Aside from increased activity on the Ethereum network, the increased usage has also resulted in high transaction fees.

At the moment, there is not much negative news flow coming from the Ethereum camp or major media outlets. Data shows that Ether’s fundamentals are still strong, and investors are content to wait for further Eth2 network developments.

To understand whether the recent crash reflects a potential local top, investors should gauge the network usage metrics on the Ethereum network. A great place to start is analyzing transactions and transfer value.

ETH/USD price vs. Transactions and Transfers. Bron: DigitalAssetsData

The chart above shows the indicator spiking above $8 billion in daily transactions, een 200% increase compared to the previous month’s $2.6 billion average. This noticeable hike in transaction and transfer value signals strength and suggests that Ether’s price is sustainable above $1,000.

Exchange withdrawals point to whale accumulation

Increasing withdrawals from exchanges can be caused by multiple factors, including staking, yield farming, and buyers sending coins to cold storage. Meestal, a steady flow of net deposits indicates a willingness to sell in the short-term. Aan de andere kant, net withdrawals are generally related to periods of whale accumulation.

ETH/USD price (Rechtsaf) vs. Exchanges Net ETH Flow (left). Bron: CryptoQuant

From Jan. 4 to Jan. 11, exchanges faced 460,000 ETH net withdrawals. This move signals a potential accumulation from whales, either transferring to cold wallets or putting these coins into the DeFi ecosystem.

This move contradicts the usual expectation that large holders rush to deposit on exchanges as Ether approaches its all-time high. Apart from a 100,000 ETH net deposit on Jan. 10, the net withdrawal trend has prevailed since December 2020.

The futures premium is still unusually high

Professionele handelaren hebben de neiging om langerlopende futurescontracten te domineren met vaste vervaldata. By measuring the expense gap between futures and the regular spot market, a trader can gauge the level of bullishness in the market.

The 3-month futures should usually trade with a 1.5% of hogere premie ten opzichte van reguliere spotbeurzen. Telkens wanneer deze indicator vervaagt of negatief wordt, dit is een alarmerende rode vlag. This situation is known as backwardation and indicates that the market is turning bearish.

maart 2021 ETH futures premium. Bron: Digitale activagegevens

The above chart shows that the indicator has been ranging from 3.5% naar 6%, which translates as moderately bullish. The current 4.5% rate is equal to a 19% annualized premium and is significantly above the 6% neutral threshold. This shows that despite the recent $1,000 dip, professional traders are still confident in Ether’s price potential.

Spot volume remains strong

In addition to monitoring futures contracts, profitable traders also track volume in the spot market. Typisch, low volumes indicate a lack of confidence. Therefore significant price changes should be accompanied by robust trading activity.

ETH aggregate spot exchanges volumes. Bron: Coinalyze.net

Last week Ether averaged an impressive $6.7 billion in trading volume, a noticeable increase from the levels seen in previous weeks. Despite the current drop, trading activity surrounding the recent price peak is a positive indicator.

Options put/call ratio

By measuring whether more activity is going through call (kopen) opties of put (verkopen) opties, one can gauge the overall market sentiment. In het algemeen, call-opties worden gebruikt voor bullish strategieën, whereas put options for bearish ones.

EEN 0.70 put-to-call-ratio geeft aan dat openstaande putopties achterblijven bij meer bullish calls 30% en is daarom bullish.

ETH options put-to-call ratio. Bron: Cryptorank.io

At the moment, there is no sign that investors have flipped to more neutral-to-bearish (put option) strategies, as the indicator stands at a 0.77 and favors call options. This trend has also prevailed over the past week, as investors continued to open new bullish positions.

This data is very encouraging, considering that Ether rallied 38% sinds Jan. 4 until reaching its $1,350 top. niettemin, it is essential to monitor how today’s sharp correction will affect these bullish signs in the future.

Like Bitcoin (BTC), Ether continues to show positive fundamentals, even during the current sell-off, and this suggests that there is a good chance that the uptrend has not been broken.

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Bron: CoinTelegraph

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