Will Ethereum’s price prediction piggyback on Bitcoin’s rise?

• Ethereum’s price saw an 18-month high at press time.
• With the recent price uptick, ETH’s price has become more prone to fluctuations. 

Sharing a statistically significant correlation with the leading coin Bitcoin [BTC], whose price has rallied above $40,000, Ethereum’s [ETH] price has climbed to an 18-month high. 

On the 4th of December, BTC briefly traded above the $42,000 price mark for the first time since April 2022.

This positive sentiment undoubtedly spilled over into the ETH market, as the altcoin exchanged hands at a high of $2,250 on the same day, a price level it last recorded in May 2022. 

New highs, new troubles

Apart from its price rally, ETH’s Open Interest has also risen significantly in the past few days. By the 4th of December, this had grown to over $4.5 billion, representing its highest level since February 2023. 

Source: Santiment

Rising Open Interest alongside rising prices suggested that new money was coming into the market, fueling the bullish momentum. This signaled that the upward trend was likely to continue.

However, with price volatility making a gradual comeback, the rally might be short-lived, as traders increasingly occupied leveraged positions.

ETH’s Bollinger Bands indicator (BB), assessed on a daily chart, confirmed the possibility of significant price swings soon. At press time, the altcoin’s price traded above the upper band of this indicator.

Likewise, the gap between the upper and lower bands of the BB indicator has widened consistently since the 30th of November. 

A gradual widening of these bands typically indicated an increase in market volatility. The coin’s Bollinger Bandwidth, which has grown since then, confirmed the rising volatility. 

Source: TradingView

Due to the recent price surge, ETH’s estimated leverage ratio has risen. This indicated that, at press time, traders were borrowing more money to trade the leading crypto asset.

ETH’s climbing leverage ratio is often seen as a bullish signal. Notably, it suggests that traders are confident that the coin’s price will continue to rise. 

However, it is also risky, as traders with high leverage are more vulnerable to liquidations if the market moves against them.

Realistic or not, here’s ETH’s market cap in BTC’s terms

AMBCrypto found that ETH’s funding rates have been only positive since the October rally, meaning that traders have continuously opened trade positions in expectation of a price rally.

However, with the market approaching an overheated region, a drawback might result in the liquidation of some of these positions.