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- Factors contributing to Ethereum’s upward trajectory include a surge in open interest in the futures market.
- Moreover, there’s a resurgence in demand for ETH, driven by increased purchasing from Permanent Holders in anticipation of ETF approval.
The recent developments around the approval of the spot Ethereum ETF have sent a strong undercurrent in the market driving the ETH price higher, per the Crypto News Flash report. Since the beginning of the week, the ETH price is already up by over 28%, a rally not seen since March 2024.
As of press time, the Ethereum price has been trading at $3,800 levels. Several on-chain indicators and fundamental factors suggest that the ETH price rally will continue going ahead. Here are the three factors that would serve as a catalyst for Ethereum.
1. Ethereum Open Interest Soars
One contributing factor to Ether’s upward movement is the rise in open long ETH positions in the futures market. According to data from on-chain market intelligence firm CryptoQuant, Ethereum’s total open interest in the derivatives market surged from 2.8 to 3.2 million ETH within a few hours on May 20, as reported by Crypto News Flash.
This increase occurred following rumors suggesting that the United States Securities and Exchange Commission (SEC) might reconsider its stance on approving spot Ethereum ETFs. Notably, this surge marks the highest level of open interest since January 2023. The analysts at CryptoQuant noted:
Traders in the perpetual futures market aggressively opened long positions in Ethereum, expecting higher prices after rumors that the spot Ethereum ETF in the USA could be approved in May.
ETH’s open interest has reached a new all-time high of $14.68 billion in U.S. dollar terms. This significant increase suggests a strong underlying trend and ongoing investor confidence in Ethereum’s potential.
2. ETH Over Bitcoin
According to CryptoQuant, traders are increasingly favoring Ethereum over Bitcoin in terms of exposure. This shift is evident in the Ethereum-Bitcoin Open Interest ratio (shown as the violet line in the chart below), which surged from 0.54 to 0.67 on May 20. This indicates that the total open interest in Ethereum now represents 67% of that in Bitcoin.
“A higher ratio implies that traders prefer to have more exposure to ETH than Bitcoin at the margin, and vice versa,” writes CryptoQuant.
On May 20, the ETH/BTC trading pair hit a low of $0.04572, then surged by 19.6% to hit a two-month peak of $0.06471 on May 21. This signifies a notable strengthening of Ether’s price relative to BTC.
3. ETH Long-Term Demand Increases
According to CryptoQuant data, there’s been a resurgence in demand for ETH, particularly driven by increased purchasing from Permanent Holders in response to rumors surrounding ETF approval. On May 20, there was a notable uptick in ETH buying by Permanent Holders, reflecting anticipation of spot ETF approval, as depicted in the chart below.
Permanent Holders, as defined by CryptoQuant, refer to addresses that accumulate ETH without selling. On that day, this category of holders bought over 100K ETH, marking the highest daily level since September 2023.
