- Ethereum funding rate signals a potential rebound for ETH.
- ETH is down 16.48% over the last 7 days.
Since hitting $4,109, Ethereum (ETH) has seen significant downward pressure. So, over the past week, the altcoin fell to a low of $3,095, down 16.48%.
Despite the recent decline, Ethereum appears positioned for a return to $3,300. Indeed, Ethereum’s funding rate has cooled since facing two rejections at $4,000.
Ethereum futures market cools after $4,000 rejection
According to Cryptoquant, Ethereum’s inability to reclaim the $4,000 resistance led to massive selloffs in the futures markets.
Source: Cryptoquant
This led to a huge market crash with ETH hitting a new low. While ETH’s funding rate surged last week, the altcoin’s inability to hold above $4,000 brought the funding rate back to healthy levels. These levels are well suited for an uptrend.
Therefore, the resulting cooling effect could potentially pave the way for a more sustainable recovery in the coming weeks.
Historically, such a trend occurred in January 2024, when falling funding rates cooled the futures market, strengthening ETH for a major uptrend.
During this rally, Ethereum rose from $2,169 to $4,091. This historical precedent indicates that the current market reset could mark the start of another bullish phase.
What the ETH Charts Suggest
Although Ethereum has seen significant downward pressure over the past week, current market conditions point to a recovery.
Source: Santiment
For starters, Ethereum’s stock-to-flow ratio has surged over the past week, from 2.19 to 24.67. When the SFR increases, it implies that ETH has become more scarce amid increased accumulation by large holders.
As such, the altcoin has become more scarce. Coupled with growing demand, this drives up prices due to supply compression.
Source: Santiment
Additionally, the Ethereum MVRV Z score ratio decreased over the past week to 0.745. When the MVRV score hits such low levels, it indicates that ETH is currently undervalued, which is a good signal for accumulation among long-term holders.
This trend has been seen over the past week with whales turning to buying the dip. Increased accumulation typically creates higher buying pressure, leading to upward pressure on prices due to high demand.
Source: Santiment
Finally, Ethereum’s Bitmex basis ratio has surged in recent days, from -0.22 to 0.07. When this ratio turns positive, it reflects optimism in the futures market, as traders expect prices to rise after the decline.
Is a return likely?
As observed above, the futures market is bullish and expects ETH prices to recover. Likewise, spot demand for Ethereum is constantly increasing, creating healthy conditions for price increases.
Read Ethereum (ETH) Price Prediction 2024-25
With market optimism, ETH could recover from the $3,300 drop and reclaim higher resistance. If these conditions hold, ETH will reclaim the $3,700 resistance.
A move from there could strengthen Ethereum and move towards $3,900. However, with declines still strong, if the bulls fail to retake the market, ETH will fall to $3,160.
