The price of Ethereum (ETH) has recently surged by 20% in just a span of two days, fluctuating between $2,400 and $2,950. Currently, ETH is trading at $2,922, marking its highest level in more than three months.
This sudden price hike has been accompanied by an increase in market volatility, with the leverage ratio hitting a seven-day peak this week.
As of now, the leverage ratio stands at 0.42, indicating that 42% of derivative market positions are leveraged. A surge in leveraged positions often leads to heightened price fluctuations.
Despite the rise in leverage ratio, it has not reached extreme levels yet, leaving room for Ethereum to sustain its upward momentum.
Surge in Funding Rates and Open Interest
Newly opened positions in the derivatives market predominantly lean towards long positions, evident in the escalating funding rates which have hit a three-month high.
Increasing funding rates signify a rise in long positions and imply that traders are willing to pay a premium to maintain their positions, indicating a bullish sentiment in the market.
Simultaneously, Ethereum’s open interest has been on the rise, reaching a five-month high of $16.61 billion according to Coinglass data.
Within the last 48 hours, Ethereum’s open interest has surged by over $3 billion, indicating a significant speculative interest in ETH.
The surge in trading activity and open positions suggests a higher likelihood of increased volatility and potentially an overheated market for ETH.
Nevertheless, technical indicators hint at a possible bull run for Ethereum.
Testing the 200-Day Moving Average
Ethereum is currently testing a critical resistance level at the 200-day Simple Moving Average (SMA) on its daily chart. A successful breach of this level at $2,955 could trigger a sustained uptrend.
Breaking past this resistance level could pave the way for a 12% surge towards the 1.618 Fibonacci level at $3,260.
The Moving Average Convergence Divergence (MACD) indicator suggests further gains in the pipeline as it has turned bullish and is trending upwards, reflecting strengthening upward momentum.
Traders, however, should remain cautious for signs of profit-taking, which could push the price down to test the $2,700 support level. A breach below this support might signal a reversal in the trend.
Role of ETH ETF Inflows in the Price Rally
On 7th November, inflows into spot Ethereum exchange-traded funds (ETFs) surged to $79.74 million, marking the highest level since August as per SoSoValue data.
The Fidelity Ethereum Fund (FETH) ETF witnessed the largest inflows of $28 million, followed by the BlackRock iShares Ethereum Trust with $23 million inflows.
Additionally, the VanEck Ethereum Trust attracted $12 million in inflows, marking its first positive inflow in a fortnight.
Continued demand for ETH ETFs could potentially fuel further price appreciation for Ethereum.