After four consecutive days of gains, Ethereum (ETH) has started this week with a hopeful outlook. While this may lead to excitement over weekend gains, 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 poised to break out of a two-week period of calm.
According to the latest data from Glassnode, the supply of ETH in the last 3-6 months has just hit a 10-month low. Confirming that most ETH holders are not moving their tokens. This indicates a long-term focus still exists. Trade flow data shows that more ETH is leaving exchanges than entering them.
Careful observation of the overall flow in and out of ETH exchanges reveals that current demand outweighs selling pressure. However, there are still more noteworthy aspects to current inventory flow. Trading volume has now decreased to levels we saw before the sharp increase in on-chain transaction volume.
The above observations are crucial because they suggest that ETH trading volume could soon rebound. If this occurs, it could break the narrow range of cryptocurrencies that have been stuck in for the past two weeks.
The likelihood of breaking through or falling below recent ranges largely depends on strong demand from whales and institutions. Over the past two weeks, addresses holding at least 1,000 ETH have been declining. This indicates that whales have gradually been selling off some tokens.
Open interest in ETH futures has also decreased in the past five days, despite a 5% growth in cryptocurrencies within the same period. There are some notable points, such as the recent decrease in estimated leverage rates, indicating that the current rebound is not receiving too much speculative support.
Furthermore, forex reserves are at monthly lows while funding rates are rising.
These highlight the cautious yet optimistic outlook of the derivatives market, which is due to the lack of strong leverage.
However, the recent gains have not propelled prices out of the two-week tight price range, highlighting the current softness in demand. Therefore, it may be too early to judge whether the current uptrend represents a breakthrough.
At the time of writing, ETH is trading at $1,842. It is still trading within the narrow range of the past two weeks.