Ethereum Futures signal bullish shift despite price drop – What’s next for ETH?

• Ethereum’s funding rates underlined growing optimism, but sentiment remains cautious
• Declining active addresses and rising leverage ratios highlighted mixed trends in Ethereum’s retail and Futures markets

Ethereum has seen significant price volatility recently, leading to mixed reactions among investors. After a rally above $2,700 on 30 October, Ethereum renewed investor optimism. However, this sentiment has been challenged lately by its latest downward movement. 

Over the last 24 hours, Ethereum’s price dropped by 5.1%, hitting a low of $2,475 before stabilizing around $2,496, at the time of writing. This price dip sparked discussions about Ethereum’s market strength, with particular attention on investor sentiment in Ethereum Futures.

Despite the recent price setback, however, a CryptoQuant analyst highlighted that Ethereum’s Futures market funding rates revealed a positive outlook among traders. The funding rate, which reflects the balance between buyers’ and sellers’ optimism, registered an uptrend recently.

Funding rates and investor sentiment in Ethereum Futures

Positive funding rates are a sign that there is higher demand to go long on Ethereum Futures, indicating optimism among Futures traders. However, these rates remain below the bullish peak seen in March, during which Ethereum’s price was on a strong uptrend. This implied that while optimism exists, it is yet to reach levels sufficient to drive a major breakout.

Funding rates in Ethereum Futures lend insight into market sentiment by showing the level of bullish or bearish pressure among traders. Positive funding rates indicate a greater willingness among traders to hold long positions – A sign of bullish sentiment. Negative rates imply otherwise. 

Source: CryptoQuant

The current uptrend in Ethereum’s funding rate alluded to a growing inclination to go long in the Futures market. Especially as investors anticipate potential price gains. However, the lower funding rates compared to the levels earlier this year suggested that while sentiment has been improving, it may not yet be strong enough to drive a major price rally.

The potential for ETH to overcome resistance and maintain upward momentum hinges partly on a sustained rise in funding rates. Higher rates would reflect greater demand for long positions, potentially adding buying pressure on ETH. 

For a sustained rally, a hike in these funding rates would signal stronger investor confidence. This could help Ethereum overcome existing resistance levels, potentially pushing its price higher.

This sentiment, combined with market trends, could shape Ethereum’s trajectory in the coming weeks.

Active addresses and leverage ratios indicate market trends

Beyond the Futures market, Ethereum’s active addresses – A measure of retail interest – projected a declining trend. Glassnode data indicated that active addresses decreased from over 550,000 on 14 August to approximately 421,000 at press time. 

Source: Glassnode

Such a fall in active addresses may be a sign of waning interest among retail investors, potentially reflecting caution in the broader market. Active addresses are a metric of participation and engagement. And, a decline may suggest that fewer investors are actively trading or transferring ETH, which could dampen buying momentum.

Finally, data from CryptoQuant revealed that Ethereum’s estimated leverage ratio increased, moving from 0.35 in early October to 0.42 at press time. This metric highlights the level of leverage or borrowed funds used by traders, with a higher ratio indicating increased borrowing. 

Source: CryptoQuant

An uptrend in the leverage ratio may suggest that traders are taking on more risk, potentially expecting price gains.

However, an elevated leverage ratio can also introduce volatility, as high-leverage positions are more sensitive to price swings. This could lead to sharper moves if Ethereum’s price shifts unexpectedly.