Ethereum (ETH) Funding Rates Drop While Open Interest Rises
Since the price of Ethereum is still on everyone’s mind, investors are debating if it will reach $3,000. On September 22, 2022, the two main blockchains of Ethereum, the Ethereum Blockchain and the Beacon Chain, will merge. The former will switch from its Proof of Work mechanism to its Proof of Stake.
Price Spike Triggered by Ethereum Liquidation
Since it hit a record high of $4,868 in November 2021, the price of Ethereum has been falling. As of press time, it was trading below the $1.6k level, and its value had experienced a new 2% decline. ETH has gone down 7% over the last week and is trading at $1,556 today.
This week’s volatility has been very unpredictable. Most investors have sold their short positions during this time, which is the first time they have done so since June 2021. The funding rate also decreased significantly on August 28 and 29. Despite this, the rate remained stable on August 31.
For long-term investors, the negative number meant they were compensated more for holding onto their positions than for selling them. However, this shouldn’t cause despair as price movements can usually increase following these events.
Historically, price movements would increase following these types of events. A U-turn could also occur in the financing rate, which was barely above the $0 mark at the time of writing. While the market is heavily leveraged, it can still cause a price spike as the liquidation of short positions leads to more selling. That could cause the price to increase even further.
Open Interest Rises in Support of ETH Popularity
Not everyone expected that ETH would be able to break through the $1.6k resistance level. According to analyst Lark Davis, the failure to reach this level triggered a potential short-term decline.
Despite the negativity surrounding the proposed merger, demand for ETH will not completely disappear. In August, the total value of Bitcoin investment goods and services fell by 7.16% to $17.4 billion. On the other hand, Ethereum’s assets under management increased by 2.36% to $6.81 billion.
Open interest in the options market continued to increase, which suggests that investors are still interested in the project.
The U.S. Dollar Rally: Is Bitcoin at Risk?
Bitcoin is currently trading in a tight range between the high around $19,000 and $20,000 and might continue moving in this direction as macroeconomic factors affect its value. The price action during these low volatile periods suggests that the battle between the bulls and the bears is still ongoing. Bitcoin managed to close its August monthly candle on a positive note.
The U.S. dollar’s short-term potential to affect risk-on assets is still unclear. According to a crypto analyst, the dollar could make a fresh run at key resistance levels last seen in 2003.
The DXY Index indicated that the dollar is poised to break through the resistance at 109. It could then move toward a multi-year high of 111. That could happen as the dollar consolidates below the support level before going higher. A daily candle close would be needed to confirm the move.
Justin Bennett, a crypto analyst, noted that the dollar’s recent rally could threaten the long-term potential of digital assets. He said that the dollar’s current strength could cause volatility in the market. However, he noted that a daily close is important to confirm the dollar’s movement.
The U.S. dollar’s negative correlation with Bitcoin has been one of the main factors that have prevented digital assets from performing well in the market. That is because investors are afraid that it could affect their financial situation.
