Ethereum (ETH) may be nearing the end of its price correction as the second-largest cryptocurrency by market capitalization continues to trade slightly above $4,000, following a sharp sell-off last week when it nearly crashed to $3,400.
Ethereum Price Correction May Be Over
According to a CryptoQuant Quicktake article by contributor PelinayPA, Ethereum funding rates on crypto exchange Binance have remained positive, although within a narrow range. This shows that long ETH positions still dominate the market.
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ETH funding rate fluctuating normally on Binance – despite the digital asset’s recent extraordinary price appreciation – implies that futures traders are not exhibiting greed or euphoria, usually associated with the middle phase of a healthy uptrend.
For example, during the 2021-22 bull cycle, ETH funding rates often climbed from 0.1% to 0.2%, aligning with local market highs. Currently, these funding rates are hovering between 0.01% and 0.03%, implying that the market has not yet reached overheating levels.
Furthermore, the absence of negative funding rates confirms a decline in short positions and a high risk appetite among investors. The CryptoQuant analyst added:
The overall trend remains upward. Low funding rates combined with strong price momentum suggest the correction is likely over. In the short term, minor profit-taking or sideways consolidation between $3,600 and $3,800 would be natural. If funding rates gradually rise above 0.05%, this could signal overcrowding of long positions and trigger a short-term pullback.
The current combination of moderate leverage levels and gradually increasing spot demand points to a potential ETH rally, eyeing a range of $4,500-$5,000 in the long term. The price target could be even higher with a favorable derivatives structure and financing dynamics.
That said, a sharp increase in funding rates could be seen as an early warning of a further pullback in cryptocurrency prices. However, the ETH market structure still allows for a potential rise to $6,800 by the end of 2025, the analyst concluded.
ETH ready for new highs?
Several indicators indicate that ETH is looking to regain its bullish momentum. For example, the recent trend in ETH’s Spent Output Profit Ratio (SOPR) hinted towards the digital asset reaching $5,000 in the near term.
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Additionally, ETH exchange reserves continue to fall at a rapid rate. Recent exchange data watch that ETH reserves on exchanges have reached a multi-year low, raising the possibility of a looming “supply crisis” for the cryptocurrency.
That said, several other factors can fuel a further sale of ETH, bringing its price below $4,000. At press time, ETH is trading at $4,053, up 0.2% in the last 24 hours.
Featured image from Unsplash, charts from CryptoQuant and TradingView.com
