Is the latest Ethereum rally a bull trap or the start of a new bull market? Here’s what the ETH-taker’s buy-sell ratio looks like in this regard.
Ethereum Taker Buy/Sell Ratio Has Dropped Below 1 Recently
Analysts in the CryptoQuant post indicated that the recent sentiment has been bearish according to the metric. “Buy-sell taker ratio” is an indicator that measures the ratio between buy and sell taker volume in the Ethereum futures market.
When the value of this metric is greater than 1, it indicates that the “long” or taker’s buy volume is higher than the “short” or sell taker’s current volume. The trend means that more buyers are looking to acquire cryptocurrency at a higher price.
On the other hand, the value of the ratio that is less than the threshold indicates that the taker’s selling volume is a more dominant volume in the futures market. Thus the bearish sentiment is shared by the majority at the moment.
Here is a chart showing the trend in the 30-day moving average (SMA) Ethereum taker 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 buy-sell ratio has been taken above the 1 line with the latest rally in the asset price.
This means that the majority sentiment in the ETH futures market has turned bullish as the coin’s value has risen. However, the value of the indicator falls when the rally goes down, and the price is tilted.
The decline in the taker’s buy-sell ratio continued, and the metric immediately fell below the mark. This shows that short volume dominates the futures market after the consolidation.
Metrics have recently fallen below what was seen a year ago. From the chart, it appears that with the latest leg of the rally, the metric does not show a significant increase in value, and the dominant sentiment is still bearish.
Historically, cryptocurrencies usually peak when the 30-day SMA buy-sell ratio has assumed a bearish value. An important example seen in the chart is the November 2021 bull run top (that is, the current high price), which was formed with the metric value below the one mark.
The metric’s current value is not underwater, so we may still see some recovery in the coming days as sentiment may turn bullish again with the rally continuing.
However, the numbers warn:
(…) the new rally should be closely monitored in the coming weeks to determine if this is just a bull trap or the start of a new bull market, as the sellers could once again dominate.
The lowest value of ETH
At the time of writing, Ethereum is trading around $1,600, up 4% over the past week.
It looks like the value of the asset has declined over the last couple of days | Source: ETHUSD on TradingView
Featured images from Kanchanara on Unsplash.com, charts from TradingView.com, CryptoQuant.com