Ethereum Ethereum
+3.31%
Since the Federal Reserve cut the federal funds rate by 50 basis points last Wednesday, Ether has outperformed Bitcoin. Since the U.S. central bank cut rates for the first time in four years, Ether has risen more than 16%, while Bitcoin has risen about 6% over the same period.
According to Coinglass data, the Ethereum perpetual futures funding rate turned positive after the U.S. Federal Reserve cut interest rates last Wednesday, currently sitting at 0.0082%.
Ruslan Lienkha, head of markets at cryptocurrency exchange YouHodler, told The Block that while this suggests bullish market sentiment for ether, there is also a risk that the market could correct if optimism becomes excessive or external factors change. “The positive funding ratio for ether reflects increased demand for leveraged long positions, indicating a bullish outlook,” Lienkha said.
However, the analyst added that funding ratios in crypto markets tend to be volatile, but he did not anticipate an increase in the likelihood of a long squeeze. “While funding ratios generally reflect medium- to long-term trends in commodity markets, crypto funding ratios are significantly more volatile. However, I think it is too risky to expect a long squeeze and open a short position right now,” Lienka said.
The derivatives market is showing an increasingly optimistic outlook.
QCP Capital analysts also observed a positive change in market sentiment, noting that funding ratios are improving on major exchanges. The analysts noted that “funding ratios on major exchanges are improving, and underlying yields are becoming more attractive, especially with the recent rate cuts,” highlighting the growing optimism in the cryptocurrency derivatives space.
A Bitfinex Alpha report on Monday highlighted that altcoins, including Ether, have outperformed Bitcoin as they have moved away from six-month-old open interest and valuations. “We believe the more pronounced upside is due to the severe downturn in altcoin valuations and open interest observed since March 2024,” the analysts said.
Despite the rally, the Bitfinex report expressed concerns about increased volatility. Altcoin open interest has now surpassed the highs seen prior to the August risk asset debt unwind event, raising the risk of significant market moves. “Open interest has reached $11.48 billion, surpassing the August high of $10.74 billion, a concerning sign of potential volatility in the altcoin market,” the report said.
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