Ethereum price fell below $3,250 on March 19, down 20% from last week’s peak: a rare trend in the derivatives market trends suggest an ETH rebound could be imminent.
After shedding over $78 billion of its market capitalization over the past week, some vital market rebound signals have now emerged in ETH spot and derivatives markets
Ethereum derivatives traders are hedging rather than exit
With a 20% pullback, Ethereum has emerged the second biggest loser in the top 10 crypto market rankings behind Dogecoin (DOGE) since the post-Dencun upgrade sell-off began on March 14.
But curiously, ETH speculative traders continue to show optimism by holding and hedging their positions in hopes of an imminent recovery phase.
Coinglass’s open interest data represent the total capital stock currently invested in futures contracts for a specific cryptocurrency asset. This serves as a proxy for measuring investors’ optimism on the assets short-term price prospects.
ETH open interest stood at $14 billion, when ETH price raced to a 2024 peak of $4,092 on March 12. Following the sell-off that heralded the Dencun upgrade, Ethereum prices have rapidly dipped 20% from $4,092 to a 14-day low of $3,207 on March 19.
But interestingly, the chart above shows that while open interest has held steady, recording only a $900 million (6.4%) decline from the recent market top.
Typically, when open interest declines at a rate significantly lower than the wobbling spot prices, it indicates that bullish speculative traders may be engaging in hedging activities rather than exit their positions. Strategic investors may consider this market rebound signal, for a number of reasons.
Firstly, Long traders who hedge their positions are less likely to sell off their holdings in response to adverse price movements. Instead, they buy additional contracts to mitigate or offset their existing exposure. This increased buying pressure can lead to a higher demand for the underlying asset, which, in turn, can drive up prices.
Also, when an asset maintains a high capital stock amid a double-digit price dip as observed in the Ethereum markets over the past week, it signals to other market participants that long traders remain optimistic, despite the short-term volatility. That vote of confidence could encourage strategic traders looking to re-enter the market.
Ethereum price forecast: Bulls could regroup at the $3,200 support level
Based on the key market signals analyzed above, Ethereum price could avoid more excessive volatility in the coming days as the bulls look to regroup at the $3,200 support level to set the stage for an imminent recovery phase.
IntoTheBlock’s in/out of the money data shows the historical accumulation trends for a specific asset. It shows that there is a large support cluster of 1.5 million addresses that acquired 397,610 ETH at the average price of $3,223.
If fatigue sets in among the bears and long traders keep covering their positions, that key support cluster could effectively prevent further downswing below the $3,200.
On the upside, the recent news of Fidelity adding a staking feature in its amended spot Ethereum ETF filing, could also form a bullish sentiment catalyst accross the markets this week.
The consolidation phase could evolve into a market recovery in the coming days if ETH price can reclaim the $3,500 territory. But this seems a tall-order, as the bull could face stiff resistance from the 1.3 million addresses that acquired 841,670 ETH at the average price of $3,411.
Hence, a prolonged consolidation within the $3,200 to $3,400 range appears the more likely outlook for Ethereum price action the the coming days.
