- ETH Derivatives activity on the Binance cryptocurrency exchange has cooled down.
- The cool-down happened amid a sideways, choppy price trend for the flagship altcoin.
- Analysts say the decline in ETH derivatives activity is a signal for a potential breakout.
Ethereum, the second-largest cryptocurrency by market capitalization, has maintained a sideways, choppy trend for the past few weeks, with the price retracing downward after every attempted rally.
This trend pattern caused many traders to wait on the sidelines, without taking a trading position. From all indications, those traders are waiting for a breakout in either direction to decide what to do with the cryptocurrency.
A Changing Dynamics for Ethereum
In the meantime, cryptocurrency analysts have identified an event that could attract traders’ attention toward Ethereum. Data from CryptoQuant show that ETH derivatives activity has cooled down, a development analysts believe could precede a breakout.
Analyst Darkfost, who posted about the latest development, noted that Ethereum’s Estimated Leverage Ratio on Binance has sharply declined to 0.57, while the cryptocurrency once again tested the $2,450 resistance level. According to the analyst, lower leverage tends to stabilize the market, especially while ETH is attempting to break out of its range.
How Has Ethereum Performed Lately?
Notably, Ethereum’s latest sideways consolidation started after the cryptocurrency rebounded from its February low of $1,742. The flagship altcoin has since rallied over 40% before retracing slightly, leaving it with a net recovery of 33.5% as of the time of writing, according to TradingView’s data.
CryptoQuant’s analyst noted that during the cited rebound, Ethereum’s open interest increased by roughly $4.5B, as indicated by the crypto asset’s Estimated Leverage Ratio on Binance, which peaked at 0.76 on March 16. It highlights the acceleration in leverage usage across the platform, confirming a strong resurgence in derivatives activity.
Crucial Signals From the Latest Events
It is worth noting that Ethereum’s funding rates remained predominantly negative during the latest rebound, indicating a bearish posture from most investors. However, ETH’s declining Estimated Leverage Ratio aligns with a positive funding rate, signaling an increasing dominance in long positions.
According to the analyst, two main factors can contribute to the decline in leverage usage in Binance: long positions opened in anticipation of a breakout that were quickly closed during the latest pullback, or short positions that were closed or liquidated when ETH’s price rallied. Nonetheless, the analyst noted that spot demand will need to take over for a bullish breakout to materialize on ETH.
Related: Ethereum Price Prediction: Market Consolidates at Key $2,370 Level Ahead of Breakout
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