Ethereum bears grow more confident as futures market sees increased sell-off

Posted: September 5, 2023

• ETH’s taker buy-sell ratio (30-day SMA) recently plunged to its lowest level this year.
• While ETH’s open interest cratered, long positions dominated the futures market.

Ethereum’s [ETH] taker buy-sell ratio assessed on a 30-day simple moving average (SMA) fell to its lowest level this year on 28 August, data from CryptoQuant showed. This indicated that the altcoin’s futures market has become rife with more sell orders than buy orders.

Source: CryptoQuant

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The taker buy-sell ratio is a metric that measures the ratio between the buy volume and sell volume in an asset’s futures market. A value greater than 1 indicates more buy volume than sell volume, while a value less than 1 indicates more sell volume than buy volume.

According to a recently published report by CryptoQuant analyst who goes by the pseudonym ‘Greatest_Trader,’ ETH’s taker buy-sell ratio has spent the past few months in a “downward trajectory” to reach a yearly low at the end of last month. 

The analyst said,

“This consistent behavior underscores the dominant bearish sentiment among futures traders participating in Ethereum’s market.”

Through it all, market participants have continued to “long” ETH

An assessment of ETH’s futures open interest confirms the trend. At $4.67 billion at press time, the coin’s open interest was at its lowest mark so far this year. It began its descent on 19 April and has since fallen by 36%, data from Coinglass revealed.  

Source: Coinglass

Since the open interest decline began, ETH has fallen from its $2000 psychological price level and has since failed to reclaim it. In the last 138 days, the coin has mostly traded in a tight range between $1600 and $1800.

With the context of recent market movements in mind, ETH’s price consolidation and the attendant decline in its open interest show that the alt’s holders have spent the past few months unwinding their large speculative positions as sentiment grows poorer. 

The fall in open interest can also be due to cyclical factors, such as summer doldrums. Since June, the general market has traded sideways, with very few periods of price jumps. 

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However, while the daily count of open positions in ETH’s futures market has dwindled in the past few months, funding rates across leading cryptocurrency exchanges have been significantly positive.

Source: CryptoQuant

Apart from the severe decline experienced on 12 March, ETH’s funding rates have been positive for most of the year. This suggests that long positions have continued to outpace short positions in spite of sideways price movements.