After four consecutive days of gains, Ethereum (ETH) kicked off the week with a promising start. While this may lead to an exciting weekend rally, investors should consider a few things.
ETH’s recent four-day uptrend marks the first time in over three days that prices have favored a specific direction. Many analysts may interpret this as a sign of increasing demand surpassing selling pressure. However, it is important to look at more data points to determine if ETH is likely to break out of a two-week consolidation period.
According to Glassnode’s latest data, the supply of ETH in the past 3-6 months has just hit a 10-month low. This confirms that most ETH holders are not moving their tokens, indicating a long-term focus. Transaction flow data shows that more ETH is leaving exchanges than entering them.
Careful observation of the overall inflow and outflow of ETH on exchanges reveals that current demand outweighs selling pressure. However, there are still more notable aspects to the current inventory flow. Trading volume has now dropped to levels we saw before the sharp increase in on-chain transaction volume.
The above observations are crucial as they suggest that ETH trading volume may soon recover. If this happens, it could break the narrow range that cryptocurrencies have been stuck in for the past two weeks.
The likelihood of breaking or falling within the recent range largely depends on strong demand from whales and institutions. Over the past two weeks, addresses holding at least 1,000 ETH have been trending downwards, indicating that whales have gradually sold off some tokens.
Open interest in ETH futures has also declined in the past five days, despite a 5% growth in cryptocurrencies during the same period. There are some noteworthy points, such as the recent decrease in estimated leverage rates, indicating that the current rebound is not supported by too much speculation.
Furthermore, forex reserves are at a monthly low while funding rates are rising.
These highlight a cautious but optimistic outlook in the derivatives market, which is due to the lack of high leverage.
However, the recent uptrend has not pushed prices out of the tight price range of the past two weeks, highlighting the current softness in demand. Therefore, it may be too early to determine if the current uptrend represents a breakout.
At the time of writing, ETH is trading at $1,842. It is still trading within the narrow range of the past two weeks.