- Ethereum’s funding rate has sharply declined since rejection at $4k
- On the price front, ETH has declined by 10.08% over the last 7 days
Over the last 3 weeks, Ethereum [ETH] has struggled to maintain any upward momentum on the charts. In fact, over this period, the altcoin has seen extreme price fluctuations while trading sideways.
At press time, Ethereum was trading at $3,232. This marked a 10.08% decline on the weekly charts, with an extension to this bearish trend by another 1.85% dip on the daily timeframe.
With ETH struggling to record any sustained gains, the crypto community has expressed some concerns with analysts seeing uncertainty. For instance – Cryptoquant analyst Shayan is suggesting that ETH must hold its $3k support level to sustain an uptrend.
Ethereum’s funding rate declines
According to Cryptoquant‘s Shayan, Ethereum’s funding rate has seen a sharp decline since the altcoin faced rejection at its $4k resistance.
This notable drop in funding rate is a sign of reduced demand, weakening Ethereum’s bullish momentum. Therefore, without renewed market confidence among investors, sustaining an uptrend becomes difficult.
As the funding rate declines, ETH risks dropping below $3k. As such, the $3k support level is essential for ETH’s stability and for reigniting any northbound rally. If it breaches this level while the funding rate continues to drop, ETH will see intensified selling and a deeper correction.
Therefore, the overall Ethereum outlook depends on the altcoin reclaiming a higher funding rate to defend the $3k support level. These two will determine the next direction Ethereum takes.
What it means for ETH’s charts
Notably, when the funding rate sharply declines, it means that investors are closing long positions. Simply put, the findings for ETH alluded to a potential shift in market sentiment to bearishness.
Source: Tradingview
We can see this weakening uptrend through the decline in the Relative Vigor Index. This has declined over the past 4 days, pointing to strong downward momentum and a weakening uptrend.
This phenomenon can be further confirmed by a dropping +DI and rising -DI.
Source: Coinglass
Looking further, this shift in market sentiment can be evidenced by the rising demand for short positions. According to Coinglass, most traders have been going short on ETH with 52% of the total accounts.
When short position holders rise, it is a sign of bearish sentiment as they expect the price to dip.
Source: Santiment
Finally, Ethereum’s MVRV long-short difference declined over the past week to 9.86%. Such a drop not only signals reduced profitability for long-term holders, but also a rising lack of confidence among long-term holders. When long-term holders lose confidence, they tend to sell.
In conclusion, the declining funding rate positions Ethereum in a weak position that could see the altcoin decline. If this trend continues while investors hold bearish sentiments, ETH could see a drop to $3,160.
To keep the bullish momentum, the $3k support level must hold. A move below $3,026 could see ETH dip to $2,800.
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