Ethereum is currently trading under pressure after failing to surpass the $3,000 level in the past 24 hours, a move that is reflecting the sentiment of traders through derivatives markets. ETH is currently trading at $2,925, down 2.7% on the day, after moving in a 24-hour range capped at $3,012.99 and finding a low around $2,909.60, according to price data from CoinGecko.
As price action weakens, a notable shift has occurred, with on-chain data showing that funding rates are drifting into negative territory and derivatives positioning is starting to shift more defensively.
Funding rates slide as shorts gain ground
Ethereum’s inability to hold above $3,000 represents a significant psychological break for traders, especially after several failed attempts to hold above that level in January. Price action over the past week shows sellers maintaining control after ETH rejected around $3,360 on January 18, followed by a constant downward push towards the high of $2,900.
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Even if the decline was such so far been ordered above $2,900, this decline was accompanied by a slowdown in the dynamics of the derivatives market.
One of the clearest signals on this can be seen in Ethereum’s OI-weighted funding rate, which has continued to compress and is now approaching negative levels. At the time of writing, Ethereum’s OI-weighted index is at 0.0008%, close to entering negative territory and well below the readings of around 0.009%, which it recorded earlier in the month.
Funding rates that turn negative generally indicate that short positions are paying off long positions, meaning greater demand for downside exposure. The funding spikes that previously accompanied the early January price rebound have faded, and the overall trend suggests that bearish positioning is slowly taking over.
Open interest, liquidations and what’s next
Although Ethereum price action fell below $3,000, derivatives traders remained in the market, keeping total open interest at high levels. Data from CoinGlass shows that Ethereum’s overall open interest increased by 0.68% over the past 24 hours, showing that many traders are don’t leave Ethereum completely. At the time of writing, the total open interest stands at approximately 13.36 million ETH, or approximately $39.19 billion.
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Looking at the main exchanges, Binance holds the largest share of open interest in ETH, representing approximately $8.95 billion, but it decreased by 0.8% in the last 24 hours. CME follows with approximately $5.73 billion in open interest, up 3.72% over the past 24 hours. Gate comes next with around $4.01 billion, while MEXC is closing in on $3.51 billion in ETH open interest.
Over the past 24 hours, Ethereum liquidations totaled $64.34 million, with long positions ($52.52 million) accounting for the majority of losses.
Holding above $2,900 could allow Ethereum funding rates to normalize and open the door to another attempt at a bounce to $3,000. However, a continued decline in funding rates into negative territory could result in a bearish check pushing Ethereum below $2,900.
Featured image from Pexels, chart from Tradingview.com
