Global markets—crypto and equity—have been on a slippery slope after Fed Chair Jerome Powell focused on the need to raise interest rates further to tame inflation. While our latest market update enlists the key developments post the symposium held at Jackson Hole on Friday, Ether was impacted the most— courtesy of the changing token metrics.
What does a drop in ETH funding rate indicate?
While most crypto assets took the hit, it turned out to be a double whammy for Ethereum. Along with the ETH prices which corrected over the weekend, the ETH funding rate too dropped, according to data released by CryptoQuant. For perspective, the current funding rate is the lowest in the past 14 months, signifying bearish sentiments among ETH traders.
When funding rates were this low in June 2021, a short squeeze on Ether and BTC followed.
Deposit contracts too at a month-low
ETH 2.0 contracts involving staking deposits reached a month-low of $19,475,077,788, as reported by Glassnode. The drop in deposit contract volume might be a bearish indicator ahead of the upcoming merge. A drop in funding rates and deposit contracts was expected given the low liquidity in the market post-Jackson Hole annual policy speech and ETH’s 12% drop over the weekend.
Here is the Glassnode tweet for your reference:
Previous 1-month low of $19,589,437,125.96 was observed on 27 August 2022
— glassnode alerts (@glassnodealerts) August 29, 2022
Despite key ETH metrics retreating ahead of the big event, the growing influence of macro factors alarms traders the most. Ether is closely correlated to the S&P 500 index, with the correlation even higher than that of Bitcoin, as per data released by Santiment. Considering the market situation, we can expect higher volatility at Ether’s counter in the near term.
Currently, the negative macro influence seems to be shadowing optimism surrounding the merge.