On-chain data shows that derivatives exchanges have just received large deposits of Ethereum, something that could lead to fluctuations in the price of Ethereum.
Ethereum Exchange Netflow has seen a sharp positive surge recently
As one of the analysts at CryptoQuant Quicktake explained mailExchange Netflow for ETH has recorded a significant rise recently. “Exchange Netflow” here refers to an on-chain indicator that tracks the net amount of ETH moving into or out of wallets linked to centralized exchanges.
When the value of this metric is positive, it means that investors are depositing a net number of tokens to these platforms. How these transactions affect ETH depends on the exchange holders transfer the coins to.
In the case of spot exchanges, investors typically make deposits when they want to sell, so positive net exchange flows to platforms of this type can lead to a bearish outcome.
For derivatives exchanges, which are relevant platforms for the current discussion, the relationship with price tends not to be so simple. Coin holders transfer their coins to these exchanges to open new positions in the derivatives market.
Since new positions are generally accompanied by some leverage, it can be assumed that overall risks in the sector are higher when investors deposit on derivatives exchanges. This could lead to further fluctuations in the price of ETH.
Negative Exchange Netflow is usually bullish regardless of the platforms involved, because it means investors are moving their coins into self-custodial wallets, perhaps because they plan to hold them for the long term.
Now, here’s a chart showing the trend in Ethereum Exchange Netflow for derivatives platforms over the past few weeks:
As shown in the chart above, Ethereum Exchange Netflow has seen a significant spike into positive territory recently, indicating that investors have just made a significant net deposit into derivatives platforms.
Owners transferred around 82,000 ETH to these exchanges with this net inflow. As mentioned earlier, this trend could lead to higher volatility for ETH.
It is difficult to determine what direction any emerging volatility in the cryptocurrency might take, as other positive rallies in the past couple of months have proven to be mixed.
Given that the recent rise coincided with a decline in the price of Ethereum, many of these trades may be short positions forecasting further decline. If so, a swing to the upside could lead to the liquidation of these positions, which would increase the strength of the rally.
Ethereum price
At the time of writing, Ethereum is trading at around $2,400, down about 7% over the past week.