Ethereum (ETH), the world’s second largest cryptocurrency, has been on a tear lately. After months of hesitation, the currency has seen a price surge, and analysts are now pointing to signs within the derivatives market that this rally may have track.
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Taker Buy Sell Ratio Nears Equilibrium
A key indicator is the Taker Buy Sell Ratio, a metric that tracks the volume of buy orders compared to sell orders on the ETH perpetual futures market. Traditionally, a ratio below 1 indicates that more sell orders are flooding the market, potentially driving the price down. Conversely, a ratio above 1 indicates a dominance of buy orders, which is often a bullish signal.
SEC Okay Discovers Ethereum ETFs, Market Expectations Have Reversed
News that the US SEC has approved spot Ethereum ETFs has caused a sharp reversal in market expectations for Ethereum ETF rejection this week, and as a result, the price of Ethereum (ETH) is moving erratically in late Thursday’s activity .
At this time, Ethereum was trading at around $3,770. That’s both significantly higher than the previous session’s low of $3,500, and sharply lower than the previous session’s highs of over $4,000.
TREE!! APPROVED! There it is. The SEC just approved the spot #Ethereum ETFs. What a turn of events. It really happens.
h/t @PhoenixTrades_ pic.twitter.com/KQ39mDyCbT
— James Seyffart (@JSeyff) May 23, 2024
CryptoQuant, a leading crypto analytics platform, recently reported that ETH’s Taker Buy Sell Ratio, as measured by a seven-day simple moving average, is about to cross above the 1 center line. This means a decrease in the number of sales orders and a potential increase in buying pressure. This suggests that the coin may soon regain the $4,000 price level.
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This upward trend in Taker Buy Sell Ratio signals a potential shift in market dynamics, noted ShayanBTC, a pseudonymous analyst at CryptoQuant. If the ratio continues to rise, it could indicate a reduction in aggressive selling pressure, which could be a positive development for ETH’s price, ShayanBTC added.
Futures Open Interest Reaches New Highs
Another data point supporting the bullish case comes from the Futures Open Interest metric. This metric tracks the total amount of outstanding futures contracts that have not yet been closed or settled. A rising Open Interest suggests that more traders are taking new positions, possibly anticipating a price increase.
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According to Coinglass, another crypto analysis platform, ETH’s Futures Open Interest rose to a new all-time high of 16 billion dollars. This means an increase in market participation, with more traders betting on the future of ETH.
The highest OI ever indicates a significant increase in investor confidence. This could be due to several factors, including ETH’s growing institutional adoption and the upcoming Ethereum 2.0 upgrade.
Featured image from Explorersweb, chart from TradingView