Ethereum is trailing Bitcoin, but is this rally sustainable?

Ethereum recently shook Bitcoin with its rally toward $3,100. Here’s whether this run is sustainable, based on futures market data:

Ethereum broke away from Bitcoin last week, rising more than 7%.

While Bitcoin has been consolidating recently, Ethereum appears to be gathering bullish momentum of its own, with the asset surging more than 7% last week.

The chart below shows ETH’s performance over the past month.

The price of the coin seems to have been climbing recently | Source: ETHUSD on TradingView

In the last 24 hours, Ethereum reached a high of $3,130, the first time it has reached this level since the first half of April 2022. Since then, the coin has fallen slightly and currently sits at around $3,100.

Nonetheless, despite this small retracement, ETH still performed noticeably better than the original cryptocurrency. Now, investors in the asset may be wondering whether the coin can continue this trend. Perhaps some data may be shed light on the futures markets.

ETH funding rates have remained positive recently.

As pointed out by the analyst in the CryptoQuant Quicktake post, the ETH funding ratio has recently shown positive valuations. “Funding Ratio” is an indicator that tracks the regular fees that traders currently exchange in the futures market.

A positive value for this indicator means that long-term holders are paying a premium to short-term investors to hold on to their current holdings. This trend means that the majority of sentiment in the futures market is bullish.

On the other hand, a negative indicator means that bearish sentiment is currently dominant in the sector as short-term holders outnumber long-term traders.

Now, here is a chart showing the 30-day simple moving average (SMA) trend of Ethereum funding rates over the past few years:

Looks like the value of the metric has been heading up in recent days | Source: CryptoQuant

As you can see in the graph above, the SMA Ethereum 30-day funding rate soared to extremely high levels in the first half of January. Interestingly, this is when the market top occurred due to the Bitcoin spot ETF.

After the price drop following the event, the accumulated buying power was liquidated and the funding rate stabilized. With the recent coin rally, the funding rate has risen once again.

However, this time the SMA Ethereum 30-day funding rate is not as extreme as last month. This could mean that the futures market is not yet overheated.

Naturally, this could potentially allow the current Ethereum rally to continue for some time. However, it is important to note that the higher the funding rate, the more likely it is that long-term pressure will occur.

So, although ETH is not at the same risk as it was last month, a long-term squeeze is still expected and more likely to occur as speculators continue to open more positions.

Kanchanara from Unsplash.com, featured image from CryptoQuant.com, chart from TradingView.com

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