Key Points
- Ethereum’s price could see a parabolic rally if trader sentiment improves.
- Positive signals from the futures market are necessary for another significant Ethereum price increase.
Ethereum’s price has been hovering between $2,200 and $2,500, with no significant catalyst on the horizon. However, a slight uptick in the sentiment of Ethereum traders could pave the way for a price recovery to $3,000, and potentially trigger a parabolic rally.
CryptoQuant analyst Burak Kesmeci noted on September 12, “We will wait for Ether’s funding rate to rise above 0.015 to see if the calm before the storm breaks”.
Understanding Ethereum’s Funding Rate
The funding rate of Ethereum is a small market fee that aligns the spot price with futures and stabilizes perpetual contracts. A higher funding rate often leads to stronger market optimism and indicates that traders are willing to spend more to maintain their positions for a longer period. Kesmeci added, “To see another parabolic rise in Ether, we need positive signals. The support from the futures market plays a significant role in such rallies.”
The current funding rate of Ethereum, roughly 0.0056%, has returned to the levels seen in September 2023, as per Kesmeci. This follows a surge in the rate to above 0.015% last year. According to Kesmeci, reaching this funding rate again is “crucial for tracking healthy increases during bull markets”, suggesting it may indicate potential upward momentum for Ethereum.
Ethereum’s Historical Performance
After the funding rate increase in September 2023, Ethereum’s price surged more than 166% in the following six months, peaking above $4,006 in March of the same year.
Despite the launch of Ethereum 2 earlier this month, the Ethereum price has not exceeded $2,500, a significant price point for traders. Moreover, Ethereum has underperformed Bitcoin over the past two months, despite the launch of spot Ether ETFs in July of the same year.
Futures traders are doubtful that Ethereum will reach this level in the near term. If it does, around $576.28 million in short positions could face liquidation, according to CoinGlass data. Ethereum reached its all-time high of $4,810 in September 2021, and TradingView data shows its market dominance was about 3.78% higher than its current level of 14.20%.
Institutions continue to remain bullish on Ethereum and believe that it requires better marketing and a stronger value proposition to attract more interest.
