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The latest 96 percent surge and the low funding cost on ETH futures contracts do not seem to be enough to persuade traders to purchase the Ethereum price dip.
The price of cryptocurrencies, like Ether (ETH), fell drastically today, but this is a short-term shift that does not represent the more macro-level developments that continue to paint a bullish image for assets including Ether and Bitcoin.
Ether’s price increased by 96 percent in the last 30 days, rising from $2,138 to $4,200 on May 11. Normally, the expectation would be that any trader is consumed by euphoria, as shown by funding rates approaching record levels on Ether futures contracts, but this is not the case at the moment.
The funding rate seems to have peaked on April 18, and there seems to be little that can be done to re-ignite buyers’ power at this time.
Consider how the rate for longs (buyers) to hold open positions on Feb. 20 hit 0.20 percent per 8-hour, or 4.3 percent per week. A 74% price increase in 30 days fuelled the condition as Ether attempted to bust through the $2,000 barrier.
A similar scenario occurred on April 3rd, when Ether surged 43 percent to an all-time high of $2,150. These types of movements are usually indicative of retail traders’ aggressive use of leverage. Meanwhile, to stop financing rate oscillations, whales and arbitrage desks launch long positions using fixed-month potential contracts.
On April 17, a 19% negative market swing resulted in the liquidation of $1 billion in long futures contracts. The event shattered bulls’ morale and harmed their interest in constructing leveraged-long positions.
Top traders also lack confidence
Retail traders are more likely to take longer to rebound from sudden losses, but amid the rally, skilled traders are still lacking confidence this time around.
The long-to-short nett positioning of the top traders is determined by evaluating the consolidated positions on spot, permanent, and futures contracts, giving a better picture of whether experienced traders are bullish or bearish.
With this in mind, audiences should track shifts rather than utter numbers and there are occasional differences with the methodologies used by various exchanges.
Despite reaching an all-time high of $4,380 on May 12, these top traders have one of the lowest long-to-short ratios. OKEx has seen the most dramatic turnaround, with the index reaching 0.97 on April 18 and then falling to 0.50, indicating that top traders are still nett short by a factor of two.
Binance’s top traders’ long-to-short ratio has been oscillating between 0.86 and 0.95 over the last thirty days, and the metric is currently at 0.89. This should be viewed as a ‘neutral’ stance, which seems strange given the 96 percent rally over this time frame.
Finally, Huobi’s top traders’ leverage index peaked on May 4 at 1.00, signalling a healthy long-short condition. However, it is actually at 0.95, indicating a lack of enthusiasm.
Bitcoin’s price action could be the reason
It’s no secret that Bitcoin (BTC) movements dictate traders’ general feelings, even if it means cheering for its price to stabilize near $55,000.
The real G’s called altseasons months ago but it’s no shame to tweet “altseason” now because it’s still going
Ideally Bitcoin goes sideways until it breaks out here. When Bitcoin drops and drags altcoins down, that’s where you buy dips for maximum gains.
You are welcome pic.twitter.com/5f8SyCuUxf
— muro – won’t DM you (@MuroCrypto) May 5, 2021
This #BTC Flag is sandwiched by two major resistance (red) and support (green) areas
It’s a great market structure to promote further BTC consolidation in the short-term
— Rekt Capital (@rektcapital) May 5, 2021
Posts like this can be seen all over Twitter, and they prove, in a way, that investors expect altcoins to plunge if Bitcoin falls below $50,000. This may be the main explanation for the lack of trust in Ether longs.