Bearish Signal For Ethereum: Funding Rates Hit New 2024 Lows—Is A Rally Still Possible?

As a seasoned researcher with over two decades of experience in financial markets, I have seen my fair share of bull runs and bear markets. The current trend in Ethereum’s futures market, as highlighted by CryptoQuant analyst ShayanBTC, is a reminder that the crypto world can be as unpredictable as any other market.


It has been observed in a recent study by ShayanBTC, an analyst at CryptoQuant, that there’s growing pessimism or “bearishness” regarding Ethereum, the second-largest cryptocurrency by market value, in its futures trading sector.

As a crypto investor, I’ve noticed an interesting development while keeping an eye on the CryptoQuant QuickTake platform. It appears that Ethereum’s futures market has dipped to its lowest funding rates this year, which suggests that traders in the perpetual futures market are less bullish about Ethereum’s near-term price fluctuations at present. This could be a sign of caution and potential consolidation or even correction in the short term.

Ethereum Declining Funding Rates And Market Implications

Based on ShayanBTC’s analysis, it appears that the trend for Ethereum’s funding rates over the past 50 days has been steadily decreasing. This suggests that there’s a prolonged pessimistic sentiment among futures traders towards Ethereum, as they seem to be anticipating a bearish market.

Bearish Signal For Ethereum: Funding Rates Hit New 2024 Lows—Is A Rally Still Possible?

In other words, when it comes to perpetual futures contracts, payments are exchanged between long (buyers) and short (sellers) parties according to the gap between the price of these futures and the current market rate (spot price).

As a crypto investor, when I see positive funding rates, it means that those who hold long positions (betting on the price to rise) are essentially paying off those with short positions (betting on the price to fall). This indicates a bullish sentiment among traders. On the flip side, negative funding rates imply that short traders are compensating long traders, suggesting a more bearish market stance.

For Ethereum’s perpetual futures market, the recent decrease in funding rates suggests that there’s less demand for purchasing contracts at the moment, as observed by Shayan.

To see Ethereum rising to higher costs, we need to witness an uptick in demand within the perpetual futures market. Should the ongoing pattern of unfavorable funding rates persist, it’s probable that Ethereum will encounter more short-term price drops.

Is A Rally Still Possible?

It’s clear that the downward trend in funding rates has significantly influenced Ethereum’s latest market behavior. Over the last day, we’ve seen Ethereum fall by approximately 4.9%, marking a consistent downturn in its performance.

Bearish Signal For Ethereum: Funding Rates Hit New 2024 Lows—Is A Rally Still Possible?

The drop in Ethereum’s price has dipped it below $2,300, with losses over the past month exceeding 10%. This persistent downtrend can be partly blamed on reduced demand for Ethereum in the futures market, a factor highlighted by CryptoQuant analysts.

Regardless of the pessimism seen in the futures market, certain experts maintain a hopeful view regarding Ethereum’s chances for a comeback. One of these analysts, Koroush AK, presents a more optimistic perspective, proposing that Ethereum may experience a substantial rise.

Koroush emphasized looking at longer time periods, noting the significant 100-week moving average and the crucial $2,000 support level as possible triggers for a rebound in Ethereum. He expects a rise of around 10-20% for Ethereum within the upcoming weeks, even given the current market circumstances.

$ETH
Ethereum due a large bounce.
Zooming out and looking at the higher time frames;
-100 week moving average
-Key psychological support ($2000)
Expecting a 10-20% bounce over next few weeks.
— Koroush AK (@KoroushAK) September 16, 2024

Importantly, it’s worth noting that when investments require money instead of earning it (negative funding rates), this is frequently seen as a sign of pessimism within the market. However, these negative rates can also serve as early warnings for an upcoming market recovery. This happens because negative rates can trigger a series of short position liquidations, where those who have sold short are forced to buy back, causing sudden price reversals.

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2024-09-17 12:40