Ethereum’s Funding Rate Signals a Potential Rebound for ETH

• ETH has declined by 16.48% over the past 7 days.

Since hitting $4109, Ethereum (ETH) has faced strong downward pressure. Over the past week, the altcoin dropped to a low of $3095, reflecting a decline of 16.48%.

Despite this dip, Ethereum appears poised for a comeback towards $3,300. This optimism arises from the cooling of Ethereum’s funding rate after facing two rejections at the $4k mark.

Ethereum’s Futures Market Cools After $4k Rejection

According to Cryptoquant, Ethereum’s inability to reclaim the $4k resistance led to significant liquidations in the futures markets, triggering a market crash that caused ETH to reach its lows. While ETH’s funding rate surged last week, the inability to maintain above $4k has restored the funding rate to healthy levels, conducive for a bullish trend.

This cooling effect might pave the way for a sustainable rally in the upcoming weeks. Historically, a similar situation occurred in January 2024, where decreased funding rates revitalized the futures market, leading to a significant uptrend for ETH.

During that rally, Ethereum surged from $2169 to $4091. This historical example suggests that the current market reset could signify the commencement of another bullish phase.

What ETH Charts Suggest

While Ethereum has experienced considerable downward pressure recently, current market dynamics indicate a potential recovery.

Notably, Ethereum’s stock-to-flow (SFR) ratio has risen sharply from 2.19 to 24.67 over the past week. A rising SFR suggests increased scarcity of ETH, driven by heightened accumulation among large holders.

This scarcity combined with rising demand typically leads to price increases due to supply squeeze.

Furthermore, the Ethereum MVRV Z score has dropped to 0.745, indicating that ETH is currently undervalued—an attractive sign for long-term holders looking to accumulate. This trend has been observed with whales buying the dip, which often results in increased buying pressure that drives prices higher.

Lastly, the Ethereum Bitmex basis ratio has increased from -0.22 to 0.07 in recent days. A positive basis ratio reflects optimism in the futures market as traders anticipate price increases following the dip.

Is a Comeback Likely?

As noted, the futures market appears bullish, suggesting a recovery in ETH prices is expected. Additionally, spot demand for Ethereum is rising, creating favorable conditions for price appreciation.

With market sentiment improving, ETH could recover from the $3300 dip and aim to reclaim higher resistance levels. If these trends continue, ETH may retake the $3700 resistance, and potentially strengthen towards $3900. However, with ongoing bearish pressure, if bulls are unable to regain control, ETH might fall to $3160.