Ethereum rebound at risk? Exchange data flashes warning

Ethereum traded at $2,280.47 at press time, with 24-hour volume at $10.18 billion, according to crypto.news data. 

ETH gained 0.75% in the past day but remained down 1.56% over the last seven days. Its market cap stood at $275.23 billion, based on a circulating supply of 120 million ETH. 

The price action comes as analysts track opposing signals from exchange supply and derivatives data.

Exchange supply ratio signals dip risk

CryptoQuant analyst PelinayPA said Ethereum may still face downside risk. The analyst pointed to a sharp fall in the exchange supply ratio.

In past cycles, a falling ratio often appeared near price bottoms. Lower exchange supply can mean reduced selling pressure, but the analyst said the current setup shows a gap.

PelinayPA said the ratio has dropped to low levels, but ETH has not formed a matching price bottom. The analyst said this could mean the market has not fully priced in the supply move.

The analyst added that “a delayed downward move” remains possible. The view suggests ETH may still need to close the gap between price and exchange supply behavior.

Negative funding raises squeeze debate

Another CryptoQuant analyst, Darkfost, gave a different view. The analyst said Ethereum’s short-side positioning has become crowded.

According to the analysis, Binance funding rates have stayed negative for an extended period. Darkfost compared the duration of negative funding to levels last seen during the FTX collapse period in November 2022.

The analyst said Ethereum has recovered more than 30% from its February 6 low. Still, many traders continue to hold short positions despite the rebound.

Darkfost said the monthly average Binance funding rate stands at -0.0018. This points to strong demand for downside bets among traders.

Short liquidations may support recovery

Darkfost said rising short liquidations show that some bearish traders are already under pressure. If ETH keeps moving higher, more short positions may close.

Forced short closures can add buying pressure in the market. This can support price recovery when many traders hold the same bearish position.

However, this setup does not remove downside risk. Ethereum still faces a mixed market structure, with spot supply data warning of a possible dip.

The current Ethereum outlook remains divided. One on-chain signal points to a possible delayed move lower, while derivatives data shows the risk of a short squeeze.