ETH sees signs of seller exhaustion after a bearish Q1, with declining sell pressure suggesting better conditions for buyers. Despite significant inflows into derivatives, concerns remain regarding market volatility and potential liquidation events. Negative funding rates indicate short trader sentiments, hinting at possible further ETH price drops.
Ethereum’s native coin, ETH, experienced significant bearish performance in the first quarter, leading to perceptions of widespread underperformance. However, recent observations indicate a potential weakening in sell pressure, which might benefit ETH buyers moving forward. Metrics from net taker volume suggest a decline in sell pressure over the past four months, reaching levels not seen since June 2024, hinting at seller exhaustion now favouring long-term holders.
Moreover, a noteworthy transaction flow has been noted in the derivatives market, with over 77,000 ETH inflows marking the highest in two months. Analyst Amr Taha from CryptoQuant noted a historical trend where previous inflow spikes were often succeeded by declines in ETH prices, emphasising the volatile nature of the market compounded by external factors such as China’s tariffs. This situation raises concerns over a possible liquidation event for ETH as it has seen severe liquidations of leveraged long positions in recent weeks.
Despite the cooling selling activity, appetite for leverage remains elevated compared to late 2024, although it has dipped recently. The open interest reflects the lowest levels observed since November 2024, which, alongside lower estimated leverage ratios, indicates a cautious market sentiment.
Simultaneously, there has been a considerable shift in funding rates from positive to negative, suggesting speculative positioning among short traders anticipating potential price drops. Should further selling pressure emerge, despite prior gains, ETH might see a downturn. Over the past week, Bitcoin’s persistent weakness has compounded bearish sentiment in the market. Recent inflows of $36.25 million indicate potential accumulation amidst reduced selling but scepticism about bullish strength persists.
The prevailing market dynamics reveal that exchange flows have now tilted towards higher inflows compared to outflows, reflecting market uncertainty, particularly with the influx of negative funding rates suggesting possible declines in ETH’s price. In summary, ETH bulls are struggling to establish a firm foothold, with dominating sell pressure expected to persist, albeit mitigated by signs of seller exhaustion potentially limiting further downside.
