Over the week, ether (ETH) received a large share of crypto investors’ attention as anticipation intensified about approvals for its spot exchange-traded funds (ETFs).
While the crypto asset rallied significantly as the market waited for the U.S. Securities and Exchange Commission’s (SEC) decision on the ETFs, CryptoQuant analysts identified on-chain dynamics that could trigger major volatility soon.
ETH Demand Spikes From ETF Approval
Earlier this week, ETH surged 25% in two days, exceeding $3,900, its highest level since mid-March. The rally occurred after market experts, led by Bloomberg ETF analysts, increased the odds of the SEC approving the funds from 25% to 75%.
CryptoQuant revealed that ETH prices received upward pressure from traders in the perpetual futures market and permanent holders of the cryptocurrency.
Perpetual futures market traders “aggressively” opened long Ethereum positions expecting higher prices as the ETF approval rumors made the rounds. As a result, total open interest in the futures market spiked to its highest level since January 2023, from 2.8 million ETH to 3.2 million ETH ($11.7 billion) within a few hours.
Traders gained more exposure to ETH than BTC, as seen in the Ethereum-Bitcoin Open Interest ratio, which rose from 0.54 to 0.67. The spike revealed that ether’s total open interest was 67% of bitcoin’s, indicating that market participants preferred more exposure to ETH than the largest digital asset at the margin.
In addition, buy orders dominating sell orders in the perpetual futures market increased the upward pressure on ETH prices, as seen in the taker buy-sell ratio hovering above one.
ETH Exchange Flows Spike
Furthermore, demand for ETH gained traction, with permanent holders accumulating over 100,000 ETH, their highest daily level since September 2023, in 24 hours. Similarly, the amount of staked ETH recovered. Having fallen to 32.4 million on May 20, the amount of staked ETH rose again to 32.5 million, signifying investor confidence in the cryptocurrency.
With demand for ETH rising, the asset’s daily net flows into exchanges rose to 62,000, its highest level since early March. The majority of the flows went to the crypto exchanges Binance and Bybit. CryptoQuant said high exchange flows are historically associated with price volatility, as investors may want to sell their assets to profit from potential price rises after the ETF approvals.
Meanwhile, ETH was hovering around $3,700 at the time of writing, having risen 1% in the past 24 hours.
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