Ethereum rises against the trend and approaches a record high, market sentiment is mixed

Investors were excited today when Ethereum briefly hit $4,760, just 2.2% below its all-time high of $4,870 set 20 days ago. But data shows that both retail and professional investors are slightly skeptical of the current rally.

While ETH has the potential to chart a descending channel at $3,960, today’s 5.4% rally appears to be decoupled from Bitcoin’s negative performance.

Earlier today, the U.S. Federal Reserve acknowledged that inflation is more than just a "transitory" trend, with Fed Chairman Jerome Powell saying that the Fed's loose monetary policy may end sooner than expected. This also seemed to have a bearish impact on the market, with U.S. stocks falling on Tuesday, with the Dow Jones closing down 651.76 points, or 1.85%. Bitcoin fell back below $57,000 after the Fed's comments, down about 2% in 24 hours.

To understand traders’ confidence in Ethereum’s price recovery, we should analyze perpetual futures data, which is a popular choice among retail traders because its price tends to track the regular spot market.

In any futures contract transaction, longs and shorts are always matched, but they have different leverages. Therefore, the exchange will charge a funding rate to the party that needs more leverage and pay that fee to the other party.

A neutral market typically shows a positive funding rate of 0% to 0.03%, equivalent to 0.6% per week. This suggests that longs are the payers, and data shows that retail traders have been mostly neutral since November 4, with the last break above 0.07% being on October 21.

By analyzing each client’s position across spot, perpetual, and futures contracts, one can better understand whether professional traders tend to be bullish or bearish.

There are occasional differences in methodology between exchanges, so we should focus on changes rather than absolute numbers.

Despite Ethereum’s 17% rally over the past four days, top traders on Huobi and OKEx reduced their long positions. The trend was more pronounced on OKEx, as the indicator shifted dramatically from a 120% long advantage on November 25 to a slim 30% advantage three days later.

Currently, data shows that whales have reduced their long positions, while retail traders remain skeptical about the recent bull run.

Author: Amy Liu

Image source: Bitpush Terminal, Coinglass