- Ethereum saw a huge drop in Open Interest in April after being rejected at $3.7k
- The on-chain metrics were still healthy, indicating the possibility of an upward trend
Ethereum [ETH] was trading at $3.2k at the time of writing. The psychological level of $3k has been breached several times in the lower time frames since April 13, and the sentiment behind the altcoin king has weakened significantly.
This was evident from the huge drop in Open Interest behind ETH. Combined with the price trajectory over the past few weeks, it looked like a downtrend was possible.
But with $3k defended at the higher futures, there was also the possibility of a rebound for the bulls. AMBCrypto examined the metrics in the chain to understand which path is more likely.
Similarities to February 2021
During the previous bull run, in mid-February 2021, the price of Ethereum corrected from $1.9k (an ATH at the time) to $1.4k. It was followed by a V-reversal, but it showed that there are often times when the futures market overheats.
Impatient bulls want to make money quickly by going long with leverage. This does work, but after a while the lack of spot demand and overwhelming longs in the futures market reset.
The decline in OI from $10 billion to $7.17 billion in April was likely another such reset. It is unclear whether a similar V reversal would occur given the selling pressure behind Bitcoin in recent weeks as well.
User acceptance has dropped, as have prices and sentiment
Weighted social sentiment was strongly positive for a few days in February and mid-March. Since then, it has been largely negative as prices entered a correction. The sentiment ahead of the price spike could also revolve around high gas rates on the network.
Network growth has also slowed over the past three months. An upturn would be a sign of growing demand, but it would follow an upward trend rather than precede it.
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The 90-day average coin age has steadily increased since March 27. This demonstrated a network-wide accumulation of ETH. Meanwhile, the 30-day MVRV ratio has been negative for almost a month now, indicating holders are making losses.
It provided a good buying opportunity, but some uncertainty remained. If ETH can climb back above the $3.3k resistance, swing traders and investors will have more confidence in continued gains.