For the past three weeks, Ethereum [ETH] has encountered challenges in sustaining any upward momentum in its price trends. During this period, the digital asset has experienced significant price fluctuations while mostly trading sideways.
At the current time, Ethereum is valued at $3,232, reflecting a weekly decline of 10.08%, with a further 1.85% dip on the daily charts.
Amidst ETH’s struggle to achieve consistent gains, concerns have been raised within the cryptocurrency community, with analysts expressing uncertainties. Notably, Cryptoquant analyst Shayan has emphasized the necessity for Ethereum to maintain its support level at $3k to support a potential uptrend.
Decline in Ethereum’s Funding Rate
As highlighted by Cryptoquant’s Shayan, Ethereum’s funding rate has witnessed a sharp decrease following the coin’s rejection at the $4k resistance level.
This significant drop in the funding rate indicates a reduced demand, thereby weakening Ethereum’s bullish drive. Consequently, sustaining an uptrend becomes challenging without a resurgence of confidence among investors.
The declining funding rate increases the risk of ETH falling below $3k. Therefore, the $3k support level plays a critical role in maintaining Ethereum’s stability and potentially triggering a bullish rally. Failure to uphold this level while the funding rate continues to diminish may result in escalated selling pressure and a more pronounced correction.
Hence, Ethereum’s overall trajectory hinges on the coin’s ability to recover a higher funding rate to protect the $3k support level, which will determine its future trajectory.
Implications on ETH’s Price Charts
A sharp decline in the funding rate suggests that investors are liquidating their long positions, indicating a shift towards a bearish market sentiment.
This shift is reflected in the Relative Vigor Index, which has been on a downward trend for the past four days, signaling robust downward momentum and a weakening uptrend.
Furthermore, the increase in short positions signifies a rise in bearish sentiment, with 52% of total accounts on Coinglass opting for short positions on ETH, anticipating price declines.
Moreover, Ethereum’s MVRV long-short difference declined to 9.86% over the past week, indicating reduced profitability for long-term holders and a growing lack of confidence among them. This decline often leads to long-term holders opting to sell off their holdings.
In conclusion, the diminishing funding rate puts Ethereum in a vulnerable position that might lead to a decline in its value. If this trend persists alongside prevailing bearish sentiments, ETH could potentially drop to $3,160.
Maintaining the $3k support level is crucial to sustain the bullish momentum; however, a breach below $3,026 may result in a further decline to $2,800.