Ethereum experienced a significant drop in price, falling below $3,250 on March 19, marking a 20% decline from its peak the previous week. This unusual trend in the derivatives market suggests a potential rebound for ETH in the near future.
Despite losing over $78 billion in market capitalization over the past week, Ethereum’s spot and derivatives markets now show promising signs of a turnaround. Traders in Ethereum derivatives are opting to hedge their positions rather than exit, indicating optimism for a forthcoming recovery.
Open interest data from Coinglass reveals that Ethereum’s open interest was at $14 billion when its price reached a peak of $4,092 on March 12. Despite the subsequent sell-off following the Dencun upgrade, Ethereum’s price has dropped by 20% to a 14-day low of $3,207 on March 19. Interestingly, open interest has only seen a moderate decline of $900 million (6.4%) from its recent peak, suggesting that bullish speculative traders may be engaging in hedging activities rather than liquidating their positions.
This strategic move by traders could potentially stabilize Ethereum’s price and even lead to a rebound. Long traders who hedge their positions are less likely to sell off their holdings in response to price declines, as they opt to offset their exposure by buying additional contracts. This increased buying pressure can contribute to a higher demand for Ethereum, potentially driving up its price.
Furthermore, Ethereum’s ability to maintain a high level of capital stock amid significant price fluctuations indicates sustained optimism among long traders. This confidence could encourage strategic traders to re-enter the market, further supporting a potential recovery.
Considering these market signals, Ethereum’s price may find support around the $3,200 level, with a potential recovery phase on the horizon. Factors such as the introduction of a staking feature in Fidelity’s amended spot Ethereum ETF filing could also contribute to bullish sentiment in the market.
While reclaiming the $3,500 territory may face resistance, a consolidation phase within the $3,200 to $3,400 range seems probable in the coming days, offering stability before a potential upward movement.