Three reasons why Ethereum price looks ready to rally higher
Key Ethereum price data indicate that ETH’s stop at $3,800 is transitory. Increasing predictions that spot Ethereum ETFs will be legalized in the United States have driven the price of Ether (ETH) to rise by more than 26% over the previous two days, reaching highs not seen since March 15.
Since reaching $3,800, the price of ETH has dipped slightly, but the prospect of a spot Ethereum ETF approval, as well as fundamental considerations and on-chain measures, imply that the altcoins’ climb will continue.
Increasing open interest backs Ether’s uptrend
One reason boosting Ether’s growth is an increase in open long ETH positions in the futures market. According to data from on-chain market intelligence firm CryptoQuant, Ethereum’s total open interest in the derivatives market, it is increased from 2.8 to 3.2 million ETH in a few hours on May 20 following rumours that the US Securities and Exchange Commission (SEC) was reconsidering the approval of spot Ethereum ETFs. This marks the greatest open interest since January 2023.
CryptoQuant analysts noted,
“Traders in the perpetual futures market aggressively opened long positions in Ethereum, expecting higher prices after rumours that the spot Ethereum ETF in the USA could be approved in May.”
In US dollars, ETH open interest has already reached a record high of $14.68 billion. High open interest merely suggests that the underlying trend is robust, and investor trust in Ethereum may persist.
Traders now prefer Ether to Bitcoin
The anticipated approval of a spot Ethereum ETF this week has spurred analyst speculation about the ramifications for the Ethereum price.
According to CryptoQuant experts, there are currently more purchase ETH orders in the perpetual futures market than other types of orders. The figure below shows that the taker-buy ratio is more than one, meaning that buy orders in the perpetual futures market now outnumber sale orders.
Additional research from CryptoQuant shows that traders now prefer to have more exposure to Ethereum than Bitcoin. This is demonstrated by the Ethereum-Bitcoin Open Interest ratio which rose from 0.54 to 0.67 on May 20. This implies that Ether’s total open interest is 67% of Bitcoin’s. “A higher ratio implies that traders prefer to have more exposure to ETH than Bitcoin at the margin, and vice versa.”
Similarly, TradingView data shows that the ETH/BTC trading pair rose 19.6% from a low of $0.04572 on May 20 to a two-month high of $0.06471 on May 21. This means that Ether’s price will rise against Bitcoin.
ETH demand increases
According to CryptoQuant data, higher demand for ETH appears to have regained traction, accompanied by increased buying by Permanent Holders in response to the ETF approval rumours. The figure below illustrates an increase in ETH purchases by Permanent Holders on May 20 based on spot ETF approval forecasts.
CryptoQuant defines permanent holders as “addresses that accumulate ETH and never sell.” “This type of holders bought 100K+ ETH, the highest daily level since September 2023.”
Popular analyst Ali Martinez made similar discoveries, releasing the chart below from Sentiment, which shows a significant accumulation of ETH whales on May 20. According to market intelligence service Santiment, while audience opinion towards Bitcoin and Solana remains unfavorable, enthusiasm about Ethereum has peaked since September 2023. According to Alternative. I, the Crypto Fear and Greed Index has surged to “extreme greed” at 76, up from “greed” at 64 the previous week. This suggests that retail investors are getting more optimistic about cryptocurrencies, and if the SEC permits spot Ethereum EFTs this month, the price of ETH is projected to continue rising.
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