$ETH outperforms $SOL and $BTC in capital inflow and dominance in the futures markets, with a retest of the $4,000 mark expected.
Key Takeaways:
Capital rotation favors Ethereum as the 'hot capital' ratio for Solana reaches a year-to-date low.
ETH futures dominance is increasing, with open interest reaching $58 billion.
ETH is targeting $4,000, supported by low funding rates and strong cash accumulation.
Capital flows favor Ethereum over Solana
#Ethereum has become the main beneficiary of capital rotation in the altcoin market.
According to Glassnode, the 'hot capital' ratio SOL/ETH, a measure of short-term realized capital movement, has dropped to a year-to-date low of 0.045, which is 42% lower than in April.
This indicates that while there was an inflow of funds into ETH and SOL in July, the current capital flow favors Ethereum.
Capital Movement: a hot achievement limit for Solana and Ethereum. Source: Glassnode
The 'hot realized capitalization' metric shows which asset short-term speculators prefer. Given the multi-month downtrend of the ETH/SOL pair, the data signals a 'fading but noticeable rotation, driven by ETH,' notes Glassnode.
Another bullish signal for Ether is the ETH/BTC pair, which has also returned to multi-month highs, exceeding the 200-day exponential moving average for the first time in over two years.
Weekly chart ETH/BTC. Source: Cointelegraph/TradingView
The price of ETH has returned to its average trading range, while Bitcoin continues to face active selling at the $116,000 level and below.
Ether funding rates remain stable
Open interest (OI) in Ether recently reached an all-time high of $58 billion. This increase in OI, along with a record daily number of transactions on the Ethereum network, reflects a rise in the volume of incoming funds to the market and increased network participation.
Additionally, Ethereum's share of total OI on major exchanges has risen to 34.8%, while Bitcoin's share has dropped from 59.3% to 47.1%.
Share of open interest in Ether on exchanges. Source: Hyblock Capital/X
However, although ETH has not yet surpassed the key resistance level of $4,000, futures funding rates suggest that the rally still has the potential to continue.
Current cumulative funding rates remain significantly lower than during previous attempts to break the $4,000 mark in March and December 2024. In fact, compared to March, funding rates have nearly halved.
Chart of Ether's price and cumulative funding rate. Source: Velo.data
This trend is optimistic for two main reasons: first, lower funding rates indicate that traders are not overly leveraging to open long positions, reducing the risk of sudden liquidation.
Secondly, it shows that the current price movement is largely driven by spot demand (led by companies dealing in Ether treasury bonds), rather than excessive speculative positioning.
The price of Ether has corrected by 9.72% over the past seven days after five consecutive weeks of growth. Since then, ETH has quickly recovered by 9%, retesting the $3,800 mark on Thursday.
'If it breaks through, I doubt we'll drop below anytime soon. Price discovery is already close'