An interesting thing happened in the market as Ethereum ETF inflows reversed Bitcoin inflows. This was a first for the market since ETFs began trading and there may be more to this result than meets the eye.
Ethereum ETFs have historically lagged behind BTC, especially in terms of inflows. On November 29, ETH ETF inflows peaked at $332.9 million, the largest daily inflows recorded since the ETFs began trading.
It was also a double win for Ethereum ETFs because this new rally marked the first time they outperformed Bitcoin ETFs. Inflows from the latter reached US$320 million during the same trading session.
ETFs have historically been shown to have a significant impact on market direction, so strong spot demand will almost always go hand in hand with demand for derivatives.
Ethereum Open Interest Explores New Territory
Ethereum’s open interest has been hitting new highs over the past week. It peaked at $24.34 billion on November 30, at the time of writing, which was also a new ATH for the cryptocurrency.
This signaled a growing demand for the cryptocurrency in the derivatives space. This new peak in open interest and the growing demand for Ethereum ETFs reflect a new wave of demand for the cryptocurrency.
Further analysis to establish whether the recent OI surge was bullish confirmed that it was bullish and not associated with shorts. This is because there has been a rise in positive ETH funding rates across major exchanges. Unsurprisingly, these developments have yielded positive results for ETH price action.
ETH Price Breaks Out of Bullish Flag Pattern
ETH has been stuck in a bullish flag pattern for months now, and the eventual breakout is finally happening. This was especially evident on the cryptocurrency’s weekly chart.
The cryptocurrency has been stuck in a bullish flag pattern since early March. It just concluded the week with a bullish breakout, pushing above its descending resistance.
This breakout suggests that ETH could be headed for a major rally. ETH price was trading at $3,706.08 at press time, potentially one rally away from reaching a new high in 2024.
The likelihood of such an outcome was significantly high considering the recent decline in Bitcoin dominance. The latter has fallen by almost 7% in the past 2 weeks after embarking on a steady rise since the beginning of the year.
The recent drop marked the sharpest turnaround in Bitcoin’s dominance this year. But why is this bullish for ETH’s price? This is mainly because it could be signaling the start of altcoin season.
Bitcoin has largely sucked up most of the liquidity flowing into the market. The decline in dominance means that investors are likely to shift their attention to altcoins.
ETH is at the forefront of altcoins that are likely to benefit from Bitcoin’s declining dominance. The recent surge in inflows into Ethereum spot ETFs and open interest in the derivatives segment are likely signs of what is already at play.
However, traders should proceed with caution as high open interest makes ETH susceptible to potential leveraged long liquidations.