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Can DEX volumes influence Ethereum prices?

2min Read

When the SEC imposed sanctions on centralized exchanges, the volume of trade on DEXes reached its peak accompanied by a surge in ETH’s price.

Can DEX volumes influence Ethereum prices?

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  • A correlation between DEX volumes and ETH prices was observed. 
  • Traders showed optimistic behavior and Call options began to rise.

The Ethereum[ETH] market has exhibited considerable volatility in recent months, leaving traders grappling with the task of accurately assessing its price trajectory. This challenge was further compounded by the ongoing developments and new upgrades underway within the Ethereum network.

Read Ethereum’s Price Prediction 2023-2024

Turn up the volume

However, recent data provided by CryptoQuant sheds light on an interesting observation: the volumes traded on decentralized exchanges (DEX) for Ethereum show a notable correlation with the price movements of the cryptocurrency. This correlation highlights the potential utility of DEX volumes as an additional indicator for traders, providing valuable insights to help gauge the future direction of Ethereum’s price.

Sourcce: CryptoQuant

There has been a consistent increase in the volume of ETH transactions on DEX platforms since January. Notably, in March, when the SEC imposed sanctions on centralized exchanges, the volume of trade on DEXes reached its peak accompanying a surge in ETH’s price.

However, after that, there was a consistent fall in DEX volumes. This decline in DEX volumes could be considered as a bearish signal. However, while there was a correlation between the volume of trade on DEXes and the price of ETH, it does not necessarily imply a direct causation. The price of ETH would be subject to other factors that will play a role in deciding ETH’s future.

How are traders reacting?

Despite these factors, traders are still positive towards ETH. The declining put-to-call ratio for Ethereum confirmed the same. A declining put-to-call ratio indicates a shift in market sentiment towards a more bullish outlook.

Realistic or not, here’s ETH’s market cap in BTC’s terms

The put-to-call ratio is a metric used to assess options trading activity by comparing the number of put options (bearish bets) to call options (bullish bets) being traded. If the put-to-call ratio is low, it suggests that fewer traders are taking bearish bets against ETH.

Source: TheBlock

Moroever, another reason for the bullish behavior exhibited by the traders could be the declining Implied Volatility. When implied volatility falls, it suggests that market participants anticipate less uncertainty or lower potential price swings in the future. Traders and investors may interpret lower implied volatility as a signal of reduced risk or a less turbulent market.

Source: TheBlock



Himalay is a full-time journalist at AMBCrypto. A Computer Science graduate, Himalay writes about crypto with a special focus on the latest coin-based updates. He is a fan of gonzo journalism, transgressive fiction, heavy metal, and Manchester United.
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