3 reasons why the price of Ethereum looks set to rally higher

Expectations for the adoption of Ethereum ETFs in the United States have sent the price of Ether (ETH) jumping more than 26% in the past two days to the highest level of trading since March 15.

Since reaching $3,800, the price of ETH has pulled back slightly, but spot opportunity Ethereum ETF approval and fundamentals and on-chain metrics suggest that the growth of altcoins will remain intact.

The increase in open demand supports the growth of Ether

One reason supporting the rise of Ether is the increasing number of open long ETH positions in the futures market. After rumors emerged that the US Securities and Exchange Commission (SEC) was doing a U, data from chain market data firm CryptoQuant showed that Ethereum's total interest in the derivatives market increased from 2.8 to 3.2 million ETH in a few hours on May 20. – Turn on approval of spot Ethereum ETFs. This is the highest open demand since January 2023.

According to CryptoQuant analysts,

“Traders in the perpetual futures market have opened long positions in Ethereum, expecting higher prices after rumors that the spot Ethereum ETF in the United States may be approved in May.”

In US dollars, ETH open interest has now increased to a high of $14.68 billion. High open interest simply indicates that the underlying trend is strong and investor confidence in Ethereum can continue.

Traders now prefer Ether to Bitcoin

This week's approval of the Spot Ethereum ETF has sparked discussions among analysts about possible downsides to Ethereum's price.

According to CryptoQuant analysts, ETH orders buy more in the perpetual futures market compared to other order types. The chart below shows that the bid-ask ratio is greater than one, indicating that buy orders are now greater than sales in the perpetual futures market.

“This puts a lot of pressure on prices.”

Additional data from CryptoQuant revealed that traders now prefer greater exposure to Ethereum over Bitcoin. This can be seen with the Ethereum-Bitcoin open interest ratio (violet line in the table below) which spiked from 0.54 to 0.67 on May 20. This means that the total open interest of Ether is 67% of Bitcoin.

“A higher ratio indicates that traders prefer exposure to ETH over Bitcoin on margin, and vice versa.”

Similarly, data from TradingView shows that the ETH/BTC trading pair rose from a low of $0.04572 on May 20, rising 19.6% to reach a two-month high of $0.06471 on May 21.

The strength of the ETH/BTC volatility has strengthened at the 68 relative strength index position, which suggests that Ethereum's progress is intact.

Related: Is Ethereum ETF Verified? The VanEck Spot Ether ETF is listed on the DTCC.

Demand for ETH will increase

According to CryptoQuant data, the increase in ETH demand appears to have rekindled demand following the ETF approval rumor, with increased buying from fixed-term holders. The chart below shows the increase in ETH purchases by permanent holders on May 20 based on spot ETF approvals.

CryptoQuant defines permanent holdings as “an address that stores ETH and never sells it.”

“Such holders bought 100K+ ETH, the highest daily level since September 2023.”

Well-known analyst Ali Martinez made a similar observation, sharing the following chart from Santiment showing the increase in ETH whales accumulated on May 20.

While public sentiment toward Bitcoin and Solana remains bullish, the buzz surrounding Ethereum is at its highest level since September 2023, according to market data firm Sentiment.

“#Ethereum has been seeing a lot of #nervous public sentiment since September. #SEC may approve first #ETF and $ETH price hike.”

According to data from Alternative.me, the Crypto Fear and Greed Index rose from the “Greed” level of 64 last week to the “Extreme Greed” zone at 76. This means that retail investors are becoming more positive about cryptocurrencies, and if the SEC approves Ethereum EFTs this month, the price of ETH is expected to continue to rise.

This article does not contain investment advice or recommendations. Every investment and business activity involves risk, and readers should do their own research when making a decision.