Ethereum network saw a nine-fold increase in its smart contract deposits, but a descending channel continues to pressure the price.
Even though Ether (ETH) reached a $4,870 all-time high on Nov. 10, bulls have little reason to celebrate. The 290% gains year-to-date have been overshadowed by Dec.’s 18% price drop. Still, Ethereum’s network value locked in smart contracts (TVL) increased nine-fold to $155 billion.
Looking at the past couple of months’ price performance chart doesn’t really tell the whole story, and Ether’s current $450 billion market capitalization makes it one of the world’s top 20 tradable assets, right behind the two-century-old Johnson & Johnson conglomerate.
2021 should be remembered by the decentralized exchanges’ sheer growth, whose daily volume reached $3 billion, a 340% growth versus the last quarter of 2020. Still, crypto traders are notoriously short-sighted, accentuating the impact of the ongoing downtrend channel.
To understand whether bearishness has been instilled, one must analyze the futures’ funding rate. Perpetual contracts, also known as inverse swaps, have an embedded rate usually charged every eight hours. Those measures are established to avoid exchange risk imbalances. A positive funding rate indicates that longs (buyers) demand more leverage.
However, the opposite situation occurs when shorts (sellers) require additional leverage, and this causes the funding rate to turn negative. As depicted above, the eight-hour fee has been ranging near zero in December, indicating a balanced leverage demand from buyers and sellers. Had there been some panic moments, it would have been reflected on such derivatives indicators.
Exchange-provided data highlights traders’ long-to-short net positioning. By analyzing every client’s position on the spot, perpetual and futures contracts, one can better understand whether professional traders are leaning bullish or bearish.
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