Ethereum price expected to face corrections as ETH funding rate hits a yearly highs
|- Ethereum price trading at $2,050 slid slightly over the past two days, still maintaining gains on a weekly basis.
- ETH funding rate is presently at a yearly high, which suggests the market is overheated and could correct.
- At the moment, nearly 75% of all ETH holders are in profit, which historically has resulted in profit-taking, bolstering the projected outcome of ETH.
Ethereum price followed in the footsteps of Bitcoin and rose to trade above $2,000 in the past month. But the consistent rally seems to be reaching its saturation as the potential of profit-taking and correction is seemingly at its highest at the moment.
Ethereum price is nearing a decline
Ethereum price, trading at $2,050 at the time of writing, has risen by more than 8.5% in the past three days, nearing the 18-month-old barrier marked at $2,124 that has only been tested once since May 2022.
With ETH breaching the $2,000 mark, it has inched closer to $2,124, but the chances of a breach are unlikely, given the market is overheated at the moment. Thus, a failed breach would result in a drawdown, bringing Ethereum price back to $2,000, which would send it towards $1,800.
ETH/USD 1-day chart
But if the broader market cues remain bullish or Ethereum witnesses a bullish development, such as BlackRock filing for a spot ETH ETF last week, the cryptocurrency could witness a further rise. This would push ETH beyond the $2,124 mark, invalidating the bearish thesis and sending Ethereum price to tag the resistance level at $2,296.
The chances of a reversal are high
High funding rates generally signal that traders are holding more long positions than short positions and expecting a price rise. However, sustained high rates point to overheated markets, which usually are followed by slight corrections in price. Such is the case with Ethereum as well, given its funding rates are presently at a yearly high.
The funding rates peaked on November 9 when, according to analytics platform Coinglass, the OI-weighted rate hit a high of 0.0657%.
Ethereum funding rate
Furthermore, the investors are also likely to begin profit-taking given at the moment 75% of all ETH holders are at a profit at the moment. According to the Global In/Out of the Money (GIOM), about 37 million ETH worth over $75.8 billion bought at an average price of $1,936 is at the cusp of turning profitable.
Ethereum GIOM
These levels have historically witnessed profit-taking from investors and tend to result in short-term pullbacks. However, as noted by analytics platform IntoTheBlock, this does not significantly impact the long-term outlook for Ethereum, which remains bullish, unless ETH fails a breach of $2,124.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.