Ethereum Price Analysis: ETH Buyers Retreat From The $2,400 Level
Daily Ethereum ETH Price Forecast
- Ethereum price jumped by $800 since March 25.
- The MACD shows sustained bullish momentum.
Since March 25, the Ethereum price rose by 51%, climbing from $1,570 to $2,325. ETH reached a new all-time high earlier today ($2.398). However, ETH has since retreated from the $2,400 psychological level and dropped down.
Ethereum Price Trends In Upward Channel Formation
Since March 25, the Ethereum price was trending in an upwards channel formation. The MACD shows increasing bullish momentum, while the relative strength index (RSI) has been creeping along the edge of the overbought zone. So, ETH may trouble the $2,400 line again, but it is going to face another bearish correction.
Image: ADA/USD daily
Looking at the IOMAP, we can see that a strong support wall lies at $2,100, wherein 253,000 addresses had purchased 10.6 million ETH tokens.
Record $8B OpenOn Ethereum Futures
As Ether (ETH) continues to push higher, many analysts estimate $3,000 as a short-term price target. With the decentralized finance (DeFi) space booming and the aggregate volumes at exchanges exceeding $4 billion a day, ETH's price has rallied more than 200% since the start of 2021. The asset marked a new all-time high at $2,300 on April 13.
The remarkable price surge caused ETH’s open interest to reach a record high of $8 billion. The figure amounts to 50% of Bitcoin's (BTC) markets just a couple of months ago. A few investors believe that derivatives contracts pose a risk for more significant corrections due to liquidations. However, it’s important to remember that the same instrument can be used for arbitrage and hedging.
While retail traders typically rely on perpetual futures (inverse swaps) primarily for short-term leverage positions, professional traders and market makers tend to seek yields. This is ordinarily achieved through "cash and carry" strategies that consolidate options trades. Hence, investors must look at other indicators like the funding rate to understand whether the current open interest represents a risk or an opportunity.
Massive liquidations generally occur when buyers are excessively optimistic. Hence, a 7% intraday correction forcefully prevents everyone from using 15x or higher leverage. Despite making headlines, $1 billion orders would represent just 6% of the current average volume.
According to the chart, Ether futures aggregate volumes climb above $25 billion when additional volatility occurs, meaning the eventual liquidation impact might be even more negligible. Whenever longs demand more leverage, the funding rate will become positive. A 0.15% fee every eight hours equals 3.2% per week. Therefore, arbitrage desks and whales will buy Ether at regular exchanges and simultaneously short the futures to collect the funding rate. This trade is known as "cash and carry," and it is not dependent on markets moving up or down.
As the current futures open interest continues to rise, it indicates that markets are becoming healthier, allowing more prominent players to participate in derivatives trading. The funding rate will adjust itself by accommodating more participants on the "cash and carry" side or positions terminated due to high costs.
Ethereum Price Is Expected To Reach These Levels
Ethereum price will likely retest the $2,400 psychological level soon, since the sentiment about the buyers seems to be higher than ever before.