Ethereum, the second-largest cryptocurrency by market cap, recently showed strong upward momentum, surpassing $4,000. It is worth noting that their price rise was accompanied by a significant rise in their funding ratios, a crucial measure that reflects sentiment in the futures market.
metric, Analyzed According to CryptoQuant analyst ShayanBTC, it has reached levels not seen since January 2024. This increase in funding rates indicates growing optimism among traders, with many anticipating the possibility of Ethereum reaching all-time highs.
But is there a correction in sight?
Despite this enthusiasm, the current state of the market raises questions about sustainability. Historically, such rises in financing rates have often been preceded by short-term corrections, stabilizing the market.
According to Cheyenne, the current situation mirrors January 2024, when Ethereum saw an 88% rally following similar market conditions. The analyst notes that while the current rally may pave the way for further gains, a pullback may be necessary for healthier growth in the long term.
Funding rates are a measure of market sentiment, especially in the futures market. A positive funding ratio indicates a preference for long positions, as traders expect higher prices.
Ethereum funding prices have reached their highest level in several months
“Funding rates are at levels last seen in January 2024, when Ethereum rose 88%. This reflects increased interest in long positions as optimism grows. Similar to January, this sharp increase indicates a potential pullback. –… pic.twitter.com/euKGhIqNKO
— CryptoQuant.com (@cryptoquant_com) December 9, 2024
With Ethereum funding rates reaching multi-month highs, this trend indicates an increase in bullish sentiment. However, history shows that such sharp increases can create market imbalances in the short term, leading to corrections.
Cheyenne noted:
While Ethereum’s rise is supported by bullish sentiment, the rise in funding rates signals the need for a short-term correction, paving the way for healthier and more sustainable price growth.
Ethereum market performance
Ethereum is still below the $4,000 level after falling below this level last week. Currently, ETH is trading at $3,819, reflecting a 4.9% decline over the past 24 hours.
Despite the recent decline, the asset is up nearly 30% over the past month. However, ETH’s recent decline has taken it away from its all-time high of $4,878 in 2021, leaving it 20.5% below that peak.
However, market analysts maintain a bullish outlook on Ethereum, with many anticipating potential new highs for the asset soon.
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First of all, despite the recent rise in… $ BitcoinEthereum and altcoins have not yet responded as expected. So, I encourage those who are concerned to stay… pic.twitter.com/XsB2HroNnG
– Talha Batuhan Ayna (@TBatuhanAyna) December 9, 2024
Featured image created with DALL-E, chart from TradingView