On March 19, Ethereum’s price dipped below $3,250, marking a 20% decline from its peak the previous week. This uncommon trend in the derivatives market has sparked indications that an ETH rebound could be on the horizon.
Despite Ethereum shedding over $78 billion in market capitalization over the past week, significant signals of a market rebound have surfaced in both ETH spot and derivatives markets.
Ethereum Derivatives Traders Opt for Hedging
While experiencing a 20% pullback, Ethereum stands as the second-biggest loser among the top 10 crypto market rankings since the post-Dencun upgrade sell-off commenced on March 14, trailing only Dogecoin (DOGE).
However, amidst this decline, ETH speculative traders continue to exhibit optimism by holding and hedging their positions, anticipating a forthcoming recovery phase.
Coinglass’s open interest data, reflecting the total capital stock invested in futures contracts for Ethereum, serves as an indicator of investors’ optimism regarding the asset’s short-term price prospects.
Interestingly, despite Ethereum’s price plummeting from $4,092 to a 14-day low of $3,207 on March 19, open interest has remained relatively steady, witnessing only a $900 million (6.4%) decline from the recent market peak.
Typically, when open interest declines at a rate significantly lower than the fluctuating spot prices, it suggests that bullish speculative traders may be engaging in hedging activities rather than exiting their positions. This strategic behavior of investors may signal a potential market rebound for several reasons.
Firstly, long traders who hedge their positions are less inclined to sell off their holdings in response to adverse price movements. Instead, they tend to buy additional contracts to mitigate their existing exposure, leading to increased buying pressure and potentially driving up prices.
Moreover, the maintenance of a high capital stock amid a double-digit price dip indicates to other market participants that long traders remain optimistic despite short-term volatility, potentially encouraging strategic traders to re-enter the market.
Ethereum Price Forecast: Potential for Support at $3,200 Level
Considering the analyzed market signals, Ethereum’s price could experience reduced volatility in the upcoming days as bulls aim to regroup around the $3,200 support level, setting the stage for a potential recovery phase.
IntoTheBlock’s in/out of the money data reveals a significant support cluster of 1.5 million addresses that acquired 397,610 ETH at an average price of $3,223, suggesting a strong support level around $3,200.
Additionally, news of Fidelity adding a staking feature in its amended spot Ethereum ETF filing could act as a bullish catalyst across the markets this week.
While reclaiming the $3,500 territory may pose challenges due to resistance from addresses that acquired ETH at an average price of $3,411, a prolonged consolidation within the $3,200 to $3,400 range seems plausible in the near term, indicating potential stability in Ethereum’s price action.
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