On-chain data shows that derivatives exchanges have just received large deposits of ethereum, something that could lead to volatility in the price of eth.
ethereum Exchange Net Flow Has Seen a Strong Positive Surge Recently
As explained by an analyst at CryptoQuant Quicktake eth-moving-to-deriv” target=”_blank”>mailThe Exchange Netflow for eth has seen a huge surge recently. “Net exchange flow” here refers to an on-chain indicator that tracks the net amount of eth flowing into or out of wallets associated with centralized exchanges.
When the value of this metric is positive, it means that investors are depositing a net amount of tokens on these platforms. How these transactions affect eth depends on the exchange the holders move the coins to.
In the case of spot exchanges, investors usually make deposits when they want to sell, so positive net flows from exchanges to such platforms can lead to a bearish outcome.
For derivatives exchanges, which are relevant platforms in the current discussion, the relationship with price is usually not so simple. Holders transfer their coins to these exchanges to open new positions in the derivatives market.
As new positions are usually accompanied by some leverage, one could assume that the overall risk in the sector increases when investors deposit on derivatives exchanges. This may lead to greater volatility in the price of eth.
A negative Exchange Netflow is usually bullish regardless of the platforms involved, as it implies that investors are moving their coins into self-custody wallets, potentially because they plan to hold them for the long term.
Now, here is a chart showing the trend in ethereum Exchange Netflow for derivatives platforms over the past few weeks:
<img src="https://technicalterrence.com/wp-content/uploads/2024/11/Ethereum-volatility-soon-Derivatives-exchanges-receive-82000-ETH-in-deposits.png" alt="ethereum exchange network flow” />
As shown in the chart above, the ethereum Exchange net flow has recently seen a large rise into positive territory, suggesting that investors have just made large net deposits into derivatives platforms.
Holders have transferred around 82,000 eth to these exchanges with this wave of net inflows. As mentioned above, this trend may lead to higher volatility for eth.
It is difficult to say which direction any emerging volatility could take the cryptocurrency, as other positive spikes in recent months have proven to be mixed.
However, since the last spike coincided with a drop in the price of ethereum, many of these may be short positions predicting a further drop. If so, a swing higher could lead to the liquidation of these positions, adding fuel to the rally.
eth price
At the time of writing, ethereum is trading at around $2,400, down almost 7% from the last week.
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