A quantitative analyst has disclosed how Ethereum (ETH) experienced a death cross in this metric just prior to bearish momentum fully gripping the asset.
Ethereum Exhibited A Death Cross In Funding Rates Previously
In a CryptoQuant Quicktake article, an expert has presented a graph for the Funding Rates of Ethereum. The “Funding Rates” signifies a gauge that monitors the amount of periodic fee that traders in the derivatives market are exchanging between themselves presently.
When this metric’s value is positive, it indicates that the long contract holders are delivering a premium to the short investors to maintain their positions. Such a trend implies a bullish outlook is prevalent among most derivatives traders.
Conversely, the metric falling below the zero threshold indicates a bearish sentiment dominates the sector, as short holders significantly outnumber long holders.
Now, here is the graph for the Ethereum Funding Rates shared by the quant, which illustrates the trend in the 50-day and 200-day simple moving averages (SMAs) of the indicator over the past two years:
It appears these two lines crossed earlier this year | Source: CryptoQuant
As depicted in the above illustration, the 50-day SMA of the Ethereum Funding Rates dipped below the 200-day SMA in January this year. This indicates a shift in the market’s optimism.
From the illustration, it is noticeable that since the crossover of the two SMAs of the indicator occurred, the ETH price has been sharply declining. This trend isn’t exclusive to the asset, as the broader cryptocurrency market has exhibited a similar behavior, with investors becoming risk-averse.
In the first half of the previous year, the Funding Rates experienced a similar crossover, which resulted in a period of bearish activity for Ethereum.
Only when the reverse crossover took place, with the 50-day SMA breaking above the 200-day SMA, did bullish momentum reenter the cryptocurrency market. This pattern was also evident back in 2023.
It’s conceivable that for positive price movement to resume for Ethereum and other assets, another bullish crossover in the Funding Rates may need to occur. “When the speculators return and start employing their greedy leverage, the crypto bull market will commence,” states the analyst.
When this will take place, however, is uncertain, as the 50-day and 200-day SMAs of the indicator are currently significantly apart. In 2024, it took several months for the lines to cross again, so it might also take a considerable amount of time for the crossover to happen now.
ETH Price
Ethereum is poised to finish March on a negative note as its price has dropped to the $1,800 level, following a nearly 14% decline over the past week.
The trend in the ETH price over the last five days | Source: ETHUSDT on TradingView
Featured image from Dall-E, CryptoQuant.com, chart from TradingView.com
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