Is Ethereum’s Latest Rally a Bull Trap or the Start of a New Bull Market? This is what the ETH-taker buy-sell relationship says about it.
Ethereum Taker buy/sell ratio has dropped below 1 recently
An analyst in a CryptoQuant post noted that recent sentiment has been bearish by the metric. The “taker bid-ask ratio” is an indicator that measures the relationship between the taker’s buy and sell volumes in the Ethereum futures market.
When the value of this metric is greater than 1, it suggests that the “long” or taker buy volume is higher than the “short” or taker sell volume currently. Such a trend means that more buyers are willing to purchase cryptocurrencies at a higher price.
On the other hand, ratio values below the threshold imply that the taker’s sell volume is the most dominant volume in the futures market. Therefore, a bearish sentiment is shared by most at the moment.
Now, here’s a chart showing the trend in the Ethereum 30-day simple moving average (SMA) buy-sell ratio over the past few years:
The 30-day SMA value of the metric seems to have taken a deep plunge in recent days | Source: CryptoQuant
As shown in the chart above, the 30-day SMA Ethereum taker bid-ask ratio shot up above the 1 line with the latest rally in the asset’s price.
This means that the majority sentiment in the ETH futures market turned bullish as the value of the coin increased. However, the value of the indicator fell as the rally slowed and the price moved sideways.
The decline in the taker buy-ask ratio continued, and the metric soon plunged below the one mark. This implies that short volume dominated the futures market after the consolidation.
The metric hit a recent low that had just been seen a year ago. From the chart, it is evident that with the last leg of the rally, the metric has not shown significant increases in value and the prevailing sentiment remains bearish.
Historically, the cryptocurrency has typically found highs whenever the 30-day SMA taker’s bid-ask ratio has assumed such bearish values. A prominent example visible on the chart is the November 2021 bull run high (i.e. the current all-time high), which was formed with metric values well below the one mark.
The current value of the metric is not as submerged as it was then, so it could still see some recovery in the coming days as sentiment could turn bullish again with the rally continuing.
However, the quant warns:
(…) The recent rally should be closely monitored in the coming weeks to determine if this was just another bull trap or the start of a new bull market, as sellers could once again dominate.
ETH price
As of this writing, Ethereum is trading around $1,600, up 4% in the past week.
It looks like the value of the asset has declined over the last couple of days | Source: ETHUSD on TradingView
Featured Kanchanara Image on Unsplash.com, Charts from TradingView.com, CryptoQuant.com
