Ethereum (ETH) Price Forecast: Rising Funding Rates to Trigger $2,500 Retest?

 Insights:

• Ethereum (ETH) price rose to a weekly peak of $2,280 in the early hours of Thursday, December 21. 
• In the derivatives market, Ethereum Funding Rates recorded a noticeable spike, signaling that most traders are betting on an imminent leg-up toward $2,500
• Historical entry points of the current holders provide insights into the likely Short-term reversal points in the current ETH price trend. 

Ethereum (ETH) price crossed $2,280 on Thursday morning, its highest point in the last 10 days. A vital derivative market metric highlights how the majority of investors are positioning their ETH trades for the coming days. 

Is the aggressive approach observed among bullish Ethereum derivative traders a precursor to another leg-up? 

Bullish ETH Traders are Paying Record Fees on LONG Positions 

Ethereum has endured a relatively tepid price action this week with prices consolidating within the narrow range between $2,116 to $2,280.

But following days of subdued price performance in the spot markets, bullish traders in the Ethereum derivatives markets have now been deploying a more aggressive approach on Dec 21. 

According to crypto derivative data tracker Coinglass, ETH Funding Rates reclaimed historic peaks on around 0.30% on Thursday.  

Interestingly, a closer look at the chart below illustrates that ETH price climbed to a yearly peak of $2,400 the last time ETH Open Interest-Weighted Funding Rate (OIWFR) crossed 0.03% on Dec 9. 

This suggests that ETH price upswing to a 10-day peak of $2,280 was not a fluke, rather an offshoot of the aggressively bullish trading activity among the perpetual futures traders. 

Funding Rate is a derivatives trading metric represents the cost associated with holding a perpetual contract position over an extended period. 

The mechanism essentially balances prices in the spot and futures markets by incentivizing traders on the dominant (long or short) to pay the traders on the opposing side.

In simpler terms, positive values of Funding rate for an asset means that LONG position holders (bulls) are paying more to keep their contracts open.

An unusual increase means that the bulls are displaying a more aggressive outlook and confidence that asset spot price will remain on an uptrend.  

Hence, this spike in ETH funding rate  is a strong indication that the bullish traders expect Ethereum price to enter another leg-up in the short-term. 

ETH Price Forecast: Another $2,500 Retest?

Given the precedence set on Dec 9, the recurring spikes in ETH Funding Rate could form a bullish pattern driving ETH price closer to $2,500. 

However, historical buy/sell trends show that the $2,400 area poses a significant resistance to the next Ethereum price bounce. 

The In/Out of the Money Around Price (IOMAP) data, which groups the current Ethereum holders according to their entry prices, also affirms this outlook.

It shows that 2.25 million current holders had bought 4.98 million ETH at an maximum price of $2,430. If those holders look to take some profits, Ethereum price could retrace again in the short-term.  

But if the whales maintain their current buying trend, Ethereum price will likely smash that resistance has reclaim $2,500 as predicted.