Ethereum, the second-largest cryptocurrency by market capitalization, has yet to recover the $3,000 price level since early August. Since the beginning of September, Ethereum has mostly traded below $2,600, but this week brought a glimmer of hope for investors as it finally managed to break above the $2,600 threshold.
Now that this resistance limit has been broken, the next perspective it is a continuous increase up to the $3,000 price level. An analysis on the CryptoQuant platform points to a potential catalyst for this upward movement. Notably, this analysis identifies an emerging upward trend in Ethereum funding rates as a critical catalyst.
Rising change in financing rates
According to a ETH Analysis on CryptoQuant by ShayanBTC, the 30-day moving average of Ethereum funding rates has seen a slight but noticeable upward shift after a long period of decline. This change suggests that traders are once again becoming more confident in Ethereum’s price performance, especially after the recent Fed interest rate cut.
ETH funding fees refer to the periodic payments made between traders to keep the price of perpetual futures contracts close to the cryptocurrency’s spot price. When funding rates change positively, it often indicates that long positions are more dominant, which can create upward pressure on prices.
The importance of funding rates was emphasized by the analyst, especially considering the prospect of an upward fourth quarter of the year. Notably, they repeated that for Ethereum to continue its recovery and reach higher price levels, demand in the perpetual futures market must continue to increase in the coming weeks. A small decline in mortgage rates could result in a drop in bullish momentum.
Is Ethereum Planning a Return to $3,000?
Ethereum’s recent breakout above $2,600 is the first sign of a major shift in market sentiment. After weeks of trading below, the $2,600 price level appears to have become a key support zone for the cryptocurrency. Interestingly, this breakout sets the stage for ETH’s return to $3,000, with funding rates playing a key role.
At the time of writing, Ethereum is trading at $2,610 and is up 8% in the last seven days. Notably, this price increase is most noticeable from a low of $2,171 on September 6th, reflecting a 20% increase since then.
The positive sentiment around Ethereum is also directed towards institutional investors, which is reflected via Spot Ethereum ETFs. According to flow data, ETFs, which initially started the week with a net outflow of $79.3 million on Monday, have now witnessed two consecutive days of $62.5 million and $43.2 million. million, respectively, on Tuesday and Wednesday. The combination of these inputs could play a significant role in whether Ethereum breaks above the $3,000 price level and sustains above in the coming weeks.
Featured image created with Dall.E, chart from Tradingview.com