Sentiment shifts from fearful to neutral as ETH futures outpace BTC and SOL

ETH is showing signs of picking a direction after breaking above the $3,000 barrier. Open interest is rising, as demand for futures trading has accelerated faster than spot activity. 

ETH is starting to recover its futures activity, signaling that traders see a clearer direction in the market. ETH traded at $3,006.67, establishing a slightly higher support level. Open interest also recovered from its recent lows, moving closer to $17B. 

The ETH futures to spot ratio is growing faster compared to BTC and SOL. For now, all of the leading assets are showing more subdued futures trading, but ETH traders are shifting to speculative positions. | Source: Cryptoquant

For now, the recovery in open interest and derivative activity is still tentative. ETH has not rebuilt its open interest since the October 10-11 deleveraging event. However, ETH is expected to continue with a generally bullish direction. 

ETH traders signal a shift in sentiment

The recent ratio of futures to spot activity shows a rotation of liquidity. For the past few days, ETH futures to spot ratio has increased, signaling a return to speculative interest. 

Taking up directional positions moved ahead of buying the dip and accumulating ETH. The estimated leverage ratio for ETH is still lower compared to early October’s levels, but shows a steady recovery. 

ETH traders also recovered their appetite for risk faster, while other assets still trade in a slow derivatives market. Both BTC and SOL maintain their futures-to-spot ratios at a lower zone, but ETH is surging ahead with a higher ratio, as traders choose directional exposure. 

A more confident trend of taking leveraged positions also boosted the Ethereum Fear and Greed Index. The index rose from a local low of 21 on November 21 up to 55 points less than a week later. 

There is still no way to tell if ETH will retain the directional positions. In the short term, rising open interest may try to capture the recovery from local lows. At this point, it remains uncertain if ETH will rebuild a strong support level of long positions. ETH long positions go as low as $2,900, with short positions up to $3,100. The increased leverage may also signal the potential for a short-term liquidation of the long positions, following a relatively small price dip.

The switch to derivative-driven trading dynamics also suggests confidence that ETH is not due for new wild price swings or panic-selling from whales. This allows traders to exploit even short-term volatility for higher gains through leveraged positions. Derivatives increase their risk in the case of market panic, when even experienced traders may face sudden losses, liquidations, or erratic price moves. 

ETH hype increases as Fusaka upgrade moves closer

ETH has already partially discounted the Fusaka upgrade news, as the hard fork was expected for a long time. Despite this, Ethereum mindshare has been growing since November 21, coinciding with the price recovery.

ETH already got a boost from the Pectra upgrade, causing a bullish rally. The Fusaka event may also lead more traders to take a directional position. 

Ethereum is already partially upgraded, boosting its block gas limit. Basic transactions now cost under $0.01, with a record low in gas fees. At the same time, Ethereum activity is near an all-time peak, mostly driven by ETH transfers, stablecoin activity, and decentralized swaps. 

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