Ethereum fell below $4,200, but traders are waiting for a trend reversal

Ethereum (ETH) traders are concerned about the latest trend change on the cryptocurrency market. On November 12, the cryptocurrency began its way down, and on November 17, it dropped below $4,200. At the time of writing, ETH’s price was $4141, according to TradingView.

A quick pull-back appears to have completed the 55-day ascending channel with a target at $5,500. These ETH price changes affected traders, and they decided to liquidate a share of $200 million long futures contracts. However, according to data from CoinGlass.com, open interest in the Ether futures markets is still high.

To date, the current $11.9 billion in perpetual and quarterly futures contracts is 37% higher than two months ago. But in any derivative contract, the number of long positions (buy) and short positions (sell) is always the same.

To determine the sentiment of traders, we should analyse the futures premium (base rate), which serves as an indicator of changes in the price gap between the prices of futures contracts and prices on the spot market.

Three-month futures are usually traded at an annual premium of 5% to 15%, which is considered an opportunity cost for arbitrage trading. By delaying settlement, sellers are asking for a higher price, and this causes a price difference.

As shown above in the chart from Laevitas.ch, on October 21, Ether jumped to over $4,000, bringing the base rate to the 20% level. After three weeks in the range of 14% to 20%, the rate eventually dropped to the current 12%.

While the base rate remains neutral to bullish, it signals the end of excessive buying interest, which could be called a healthy clean-up. Given the recent changes in the ETH exchange rate, Ethereum traders should view derivatives data as a short cooling period.

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