On-chain data indicates that derivatives exchanges have recently received significant Ethereum deposits, a development that could lead to increased volatility in ETH’s price. An analyst from CryptoQuant noted a sharp positive spike in Ethereum Exchange Netflow, an on-chain indicator tracking the net amount of ETH moving into or out of wallets associated with centralized exchanges.
When this metric shows positive values, it signals that investors are depositing a net number of tokens to these platforms. The impact on ETH depends on the type of exchange where these coins are moving. For spot exchanges, such deposits often suggest a bearish trend as investors typically move their tokens there to sell. However, the dynamics change when it comes to derivatives exchanges.
Holders transfer their coins to derivatives platforms to open new positions in the market, often involving leverage, thereby increasing overall risk. This can result in greater price volatility for ETH. Conversely, a negative Exchange Netflow usually indicates a bullish trend regardless of the platform, as it implies that investors are placing their coins in self-custodial wallets with the intention of long-term holding.
In recent weeks, the Ethereum Exchange Netflow for derivatives platforms has surged sharply into positive territory, suggesting large net deposits to these exchanges. Investors have moved approximately 82,000 ETH during this net inflow spree. This trend often leads to heightened volatility for ETH.
The direction of this potential volatility remains uncertain. Previous spikes in the last few months have led to mixed outcomes. Given that the latest spike coincides with a decline in Ethereum’s price, many of these deposits may involve short positions anticipating further drops. If the market swings upwards, it could trigger liquidation of these short positions, thereby catalyzing a rally.
Currently, Ethereum is trading around $2,400, nearly 7% lower over the past week, reflecting a recent downtrend.
