- ETH bulls are in control but it might not be enough to support a strong breakout.
- The demand for derivatives seemed to be gradually recovering.
Ethereum [ETH] is off to a promising start this week after delivering a bullish performance for four consecutive days. While this may usher in some excitement related to weekend accumulation, there are a few things that investors should consider before going all in.
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ETH’s bullish performance in the last four days marks the first time that the price has favored a particular direction for over three days. Many analysts may translate this as a sign that demand is growing and outpacing sell pressure. However, a look at more data points is important to establish whether ETH is building towards potentially breaking out of its 2-week limbo.
According to the latest Glassnode data, the amount of ETH supply last active in the last 3 – 6 months just reached a 10-month low. A confirmation that most ETH holders are not moving their coins. This suggests that there is still a long-term focus. On-chain exchange flow data reveals that more ETH has been flowing out of exchanges than the amount flowing in.
📊 Daily On-Chain Exchange Flow#Bitcoin $BTC
➡️ $343.9M in
⬅️ $345.5M out
📉 Net flow: -$1.6M#Ethereum $ETH
➡️ $175.5M in
⬅️ $252.3M out
📉 Net flow: -$76.8M#Tether (ERC20) $USDT
➡️ $241.9M in
⬅️ $250.2M out
📉 Net flow: -$8.3Mhttps://t.co/dk2HbGwhVw— glassnode alerts (@glassnodealerts) May 28, 2023
A keen look at ETH total exchange inflows and outflows confirms that demand is currently outweighing sell pressure. However, there is something far more notable about the current exchange flows. Exchange flow volumes are now down to levels where we have previously seen a surge in on-chain volumes.
Source: CryptoQuant
The above observation is important because it means ETH may see a resurgence of volumes soon. If that happens, then it will likely break out of its narrow range where the cryptocurrency has been stuck for the last two weeks.
Are ETH whales buying?
The probability of a breakout or break below the recent range is largely dependent on strong demand from whales and institutions. Addresses holding at least 1000 ETH have been on a downward trajectory for the last two weeks. This is an indication that whales have been gradually offloading some of their coins.
Source: Glassnode
The same applies for ETH’s futures open interest which slid in the last five days. This is despite the 5% upside that the cryptocurrency has achieved during the same 5-day period. There are a few notables, such as the recent dip in the estimated leverage ratio, which suggests that the current upside is not supported by a lot of speculation.
Also, exchange reserves are at monthly lows while funding rates are on the rise.
Source: CryptoQuant
The above underscores a cautious but optimistic outlook in the derivatives market, thus the absence of strong leverage.
How much are 1,10,100 ETHs worth today?
Nevertheless, the recent upside has not pushed out of the narrow 2-week price range, hence underscoring weak prevailing demand. As such, it might be too early to determine if the current upside represents a breakout.
ETH exchanged hands at $1,842 at the time of writing. It is still trading within the narrow band in which it traded within the last two weeks.
