As anticipation grows for the approval of Ethereum spot exchange-traded funds (ETFs), the demand for Ether (ETH) has surged, driving significant attention from crypto investors.
On-Chain Metrics Point Towards Potential Volatility
While ETH experienced a notable rally in response to speculations surrounding the SEC’s decision on ETF approvals, analysts at CryptoQuant have identified several on-chain dynamics that could potentially lead to significant volatility in the near future.
Earlier this week, ETH witnessed a remarkable surge of 25% in just two days, surpassing the $3,900 mark, marking its highest level since mid-March. This rally was fueled by market optimism regarding the likelihood of the SEC approving the ETFs.
According to CryptoQuant, the surge in ETH prices was primarily driven by traders in the perpetual futures market and long-term holders of the cryptocurrency.
In the perpetual futures market, traders exhibited aggressive behaviour by opening long positions in anticipation of higher prices following the ETF approval rumours. This led to a substantial increase in total open interest in the futures market, reaching its highest level since January 2023.
Moreover, the Ethereum-Bitcoin Open Interest ratio surged, indicating that traders preferred more exposure to ETH compared to Bitcoin, further intensifying the upward pressure on ETH prices.
Also Read: Ethereum ETF Approved: Future Predictions for Bitcoin and Altcoins
ETH Exchange Flows Reach New Highs
Simultaneously, the demand for ETH surged, with permanent holders accumulating over 100,000 ETH within 24 hours, marking the highest daily level since September 2023. Additionally, the amount of staked ETH recovered, signalling growing investor confidence in the cryptocurrency.
However, amidst the rising demand for ETH, CryptoQuant observed a significant increase in the asset’s daily net flows into exchanges, reaching 62,000 ETH, the highest level since early March. Notably, a majority of these flows were directed towards prominent exchanges like Binance and Bybit.
High exchange flows historically correlate with increased price volatility, as investors may seek to capitalize on potential price gains following the anticipated ETF approvals.
Meanwhile, ETH’s price hovered around $3,700 at the time of reporting, registering a 1% increase in the past 24 hours.
