These On-Chain Metrics Suggest Ethereum’s Correction May Be Ending Soon

Ethereum’s recent price decline below the critical $3,000 level since early August may be approaching its end. According to an August 19 report by CryptoQuant analyst Burak Kesmeci, two key on-chain metrics suggest that Ethereum (ETH) might be poised for a rebound.

Ethereum Indicators Hint at Potential Rebound

Kesmeci noted that “buyers are beginning to regain strength in Ether,” pointing to the taker buy-sell ratio and open interest (OI) as indicators of a potential price reversal.

The taker buy-sell ratio, which tracks the proportion of buyers to sellers on major exchanges, has recently turned positive. Data from CoinGlass shows a shift from a slight advantage for short-sellers to 50.37% of positions being long in the most recent 12-hour data.

In June 2024, when Ethereum’s price peaked at $3,800, OI reached a record high, signaling an overcrowded market and suggesting a potential for price correction. The high OI often indicates excessive risk-taking, which can lead to a market correction as prices adjust to more sustainable levels.

Notably, during the correction on August 5, Ethereum’s OI dropped sharply from $13 billion to $7 billion. The significant decrease reflects that many traders closed or were forced out of their positions, contributing to the price decline. Additionally, it may suggest that the downtrend is losing momentum as positions are closed.

What’s Next for ETH?

With a reduced number of traders in the market, the trading environment may be less congested. Kesmeci believes that for Ethereum’s price to grow substantially, leveraged traders will need to re-enter the market. These traders typically seek opportunities to boost their positions, which could increase demand for ETH and drive prices higher.

In summary, the sharp drop in OI might indicate that the worst of the correction is over, positioning the market for a potential recovery. If traders view this as a buying opportunity and start opening new positions, Ethereum’s price could rise in response.