On December 17, the price of Ether (ETH) rose to $ 677, its highest level since May 2018, and it appears that the price of the highest altcoin was driven above $ 21,000 by the rapid movement of Bitcoin (BTC). It is also possible that the CME’s announcement of the ETH Futures launch also played a role.
Solid fundamentals and positive news flow also appear to be helping Ether hold above $ 640 for the past few days, and despite today’s dump, those fundamentals remain. The Eth2 stake exceeded the total suspended value of $ 1 billion. This shows that big players are committed to long term as it is not currently possible to redeem these tokens.
To understand whether the recent pump is reflecting temporary arousal or possibly a new price level, usage metrics on the Ethereum network should be measured.
An excellent starting point is analyzing transactions and transferring values.
ETH / USD price vs. Transactions and transfers. Source: DigitalAssetsData
The graph above shows how much the indicator recovered after a brief decline on December 15th. The sustained level of transactions and transfers of more than $ 2 billion a day signals a significant improvement over the past two months.
Hence, the move to $ 640 was consistent with Ethereum’s blockchain activity.
Exchange will resume
Increasing withdrawals from exchanges can be caused by a number of reasons, including staking, crop farming, and buyers sending coins to a cold store. As a rule, a steady flow of net deposits indicates a short-term willingness to sell.
ETH / USD price (red) vs. Exchange net flow. Source: Nansen & CoinMarketCap
Between December 16 and 18, 232,000 ether deposits were recorded on the stock exchanges, reversing a 14-day trend. During those two weeks, withdrawals exceeded deposits by 470,000. This shows that there was selling pressure when the price of Ether was above $ 600.
It’s worth noting that December 19 marked a net withdrawal of 293,000 ethers, the largest outflow since October 14. Thus, the initial movement of investors rushing to take profits above $ 600 may have dissolved.
While it is too early to determine whether a second wave of deposits will hit the exchanges, the indicator shows that traders are ready to accumulate at the current price level.
The futures premium peaked but has since returned to normal
Professional traders tend to dominate longer-term futures contracts with fixed expiration dates. By measuring the cost gap between futures and the regular spot market, a trader can measure the degree of upward movement in the market.
The three month futures should normally trade at a premium of 1.5% or more compared to regular spot exchanges. Anytime that ad fades or goes negative, it’s an alarming red flag. This situation is known as “backwardation” and it indicates that the market is turning bearish.
March 2021 ETH futures premium. Source: Digital Assets Data
The graph above shows that the indicator hit a high of 5.8% on December 19, but was later adjusted to 5% when ether stabilized near USD 650. Persistent values above 3.5% indicate optimism, although by no means exaggerated.
The current rate of over 4%, however, corresponds to an annualized premium of 17% and is well above the level of the previous months. This shows that despite the December 19th weakness, professional traders remain confident that Ether has bullish potential.
The spot volume is recovering
Profitable traders not only monitor futures contracts but also keep track of the volume in the spot market. Breaking resistance levels at low volumes is somewhat fascinating, as low volumes typically indicate a lack of confidence. Significant price changes should therefore be accompanied by a robust trading volume.
Total volume of the ETH spot exchanges. Source: Coinalyze.net
Even if December 17th is excluded, the impressive $ 3.2 billion volume last week is still significantly higher than average. Volume spikes are usually accompanied by new price highs, although some volume accumulation is expected thereafter.
The current weekly average signal strength of $ 1.5 billion per day leaves no doubt that a decent flow helped the $ 600 resistance break.
Put / call ratio of the options
By measuring whether there is more activity through call (buy) options or put (sell) options, general market sentiment can be measured. In general, call options are used for bullish strategies while put options are used for bearish strategies.
A put-to-call ratio of 0.70 indicates that the open positions of put options are 30% behind the more bullish calls and are therefore bullish.
Put-to-call ratio of the ETH options. Source: Cryptorank.io
Investors have been trading higher volume call options since December 11th. This signals a trend reversal from a more bearish move that lasted two weeks.
This data is very encouraging considering that ether is up 20% since December 11th, but there is no evidence that investors have bought more neutral to more bearish option strategies.
Despite some signs of weakness after Ether tested its $ 677 high on Dec. 17, each of the five indicators discussed above has held bullish levels.
When Ether quickly bounced back from its dip below $ 600 on December 21, investors gained further confidence that the uptrend was not broken.
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