Although the ether (Ethereum) It reached an all-time high of $4,870 on November 10, and the bulls have little reason to celebrate. The year-to-date increase of 290% was overshadowed by the 18% price drop in December. Despite this, the network value of Ethereum locked in smart contracts (TVL) has increased nine-fold, reaching US$155 billion.
Looking at the price performance charts of the past few months does not really tell the whole story. Ether’s current market value of US$450 billion makes it one of the world’s 20 largest tradable assets, just behind Johnson & Johnson, which has a history of two centuries.
It should be remembered that the absolute growth of decentralized exchanges in 2021, with daily trading volume reaching US$3 billion, an increase of 340% compared to the last quarter of 2020. Nonetheless, it is well known that short-sighted crypto traders exacerbate the impact of the continued downward channel.
The derivatives market does not reflect panic selling
To understand whether bearish sentiment has been instilled, it is necessary to analyze the financing rate of futures. Perpetual contracts, also called reverse swaps, have an embedded interest rate, which is usually charged every eight hours. These measures are designed to avoid exchange rate risk imbalances. A positive funding rate indicates that longs (buyers) need more leverage.
However, when the short (seller) needs additional leverage, the opposite will happen, which will cause the funding interest rate to turn negative.
As shown above, the eight-hour charge in December has been close to zero, indicating that the leverage needs of buyers and sellers are balanced. If there are moments of panic, it will be reflected in such derivatives indicators.
Top traders are increasing bullish bets
The data provided by the exchange highlights the long to short net positions of traders. By analyzing the positions of each client’s spot, perpetual contracts, and futures contracts, we can better understand whether professional traders tend to be bullish or bearish.
There are occasional differences in methodologies between different exchanges, so viewers should focus on changes rather than absolute numbers.
Although Ether has pulled back 9% since December 24, top traders from Binance, Huobi, and OKEx have increased their leveraged long positions. More precisely, Binance is the only exchange where the long-short ratio of top traders has decreased slightly. The number has changed from 0.98 to 0.92. However, OKEx traders increased the bullish bet from 1.67 to 3.20 within a week, offsetting this effect.
Currently, the market feels little bearish. According to the data, professional traders buy on dips, while retail investors’ net demand for short (sell) has hardly changed in the past month. Of course, none of these can predict when Ethereum will reverse the current downward channel, but one might infer that there is little interest in betting on the downside from here.
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