After plunging below $2,200 earlier this month, Ethereum (ETH) has slightly recovered, now trading above $2,300. Crypto analyst Burak Kesmeci says it could be on the verge of a significant price spike if the funding rate rises above 0.015%.
Currently, the rate is lower, so traders are closely monitoring market signals. If this increase happens, Ethereum’s price could see a strong upward surge.
Ethereum’s Funding Rate and its Impact
The funding rate for Ethereum plays a crucial role in aligning futures contracts with spot prices. It serves as a small market fee and stabilizes perpetual contracts.
Currently, Ethereum’s funding rate is around 0.0056%, which, according to Kesmeci, is a crucial indicator for future price movement.
The analyst notes that when the funding rate rises above 0.015%, it often signals more robust market optimism. In the past, a rise in the funding rate led to significant price increases for Ether.
Kesmeci mentioned, “To see another parabolic rise in Ether, we need positive signals. The support from the futures market plays a significant role in such rallies.”
Historical Trends Suggest Possible Upside
Looking back at Ethereum’s past performance, a similar rise in its funding rate in September 2023 resulted in a massive price surge. At that time, Ethereum’s price climbed by 166% within six months, reaching a high of $4,006 by March 2024.
This historical pattern supports the idea that Ether could be gearing up for another rally if the funding rate rises again. Analysts closely monitor this level, believing it could trigger a healthy price increase during a bull market.
Despite its strong potential, Ether has recently struggled to close above the critical $2,500 mark, which traders consider crucial.
Some market participants have been frustrated by the token’s price stagnation, especially given Bitcoin’s recent success. Even though many expected Ether ETFs to boost its price, Ethereum’s price remains stagnant.
However, market optimism remains, especially if Ethereum can break through this resistance level. If it does, it could lead to significant gains and put pressure on short positions.
According to data from CoinGlass, around $576 million in short positions could face liquidation if Ether crosses the $2,500 mark.
Ethereum Underperforms Bitcoin; Any Hope for a Recovery?
In 2024, Ethereum has underperformed compared to Bitcoin, which has surged by 36% since the start of the year. Meanwhile, Ether has only gained 0.02% during the same period. The ETH/BTC ratio has also sharply declined, hitting a multi-year low.
This has been attributed to the success of Bitcoin ETFs, which have had a more significant impact on the market than Ethereum ETFs.
Data from Glassnode reveals that Bitcoin’s ETFs have influenced about 8% of the spot volume, compared to just 1% for Ether. This disparity highlights the growing preference for Bitcoin among investors in 2024.
For Ethereum to regain its footing, the market needs positive signals, particularly from its funding rate. If the rate rises above 0.015%, it could set off a new parabolic rally.
While Ethereum has struggled in 2024, its historically solid performance suggests the token could be poised for a comeback.
As Kesmeci stated, “We are waiting for the calm before the storm to break. Ethereum’s future looks promising if the right conditions are met.”.
Disclaimer: The opinions expressed in this article do not constitute financial advice. We encourage readers to conduct their own research and determine their own risk tolerance before making any financial decisions. Cryptocurrency is a highly volatile, high-risk asset class.
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