Capital Rotation Sees ETH as Primary Beneficiary

Analysis indicates Ether (ETH) is the primary beneficiary of current capital rotation within the altcoin market.

According to data provider Glassnode, the SOL/ETH Hot Capital Ratio, reflecting short-term realized capital movement, has declined to a year-to-date low of 0.045. This represents a 42% drop since April.

While both ETH and SOL saw inflows earlier this year, the current data signals a shift, with capital flow favoring Ether.

The “Hot Realized Cap” metric highlights assets favored by short-term speculators. Glassnode interprets the ETH/SOL pair’s downtrend and the resulting data as indicating “a fading but notable ETH-led rotation.”

Bullish for ETH is also the ETH/BTC pair rising back to multi-month highs above its 200-day exponential moving average – the first time in over two years.

Conversely, Bitcoin continues to face selling pressure below the $116,000 level.

Ethereum Funding Rates Remain Low

Ethereum’s dominance in the futures market deepens, with open interest reaching an all-time high of $58 billion. This surge, coupled with record high daily transactions, signifies increased market participation.

Ethereum now commands 34.8% of total major exchange open interest, slightly less than Bitcoin’s previous peak of 59.3% but having climbed significantly from earlier levels while BTC’s share has decreased to 47.1%.

Despite aiming for the $4,000 resistance level, current ETH price action remains below this mark. However, futures funding rates provide bullish clues.

Current aggregated funding rates are significantly lower than during ETH’s previous attempts to breach $4,000, notably halving compared to levels in March 2024.

This reduction in funding rates paints a bullish picture for ETH:

1. Lower rates indicate speculators are less heavily committed to long positions, potentially reducing the risk of forced liquidation.
2. The low rates suggest the current rally is driven more by spot demand (including ETH treasury purchases and spot ETF inflows) rather than speculative excess.

NovaDius president Nate Geraci emphasizes this point, noting:

“Eth treasury companies & spot eth ETFs have *each* bought approx 1.6% of current total eth supply since beginning of June.”

ETH Sustains Rally Despite Brief Correction

While ETH experienced a 9.72% correction over the past seven days after a five-week climb, it is now rebounding, with price earlier retesting the $3,800 level.

Crypto analyst Jelle believes the $4,000 level, despite its history as persistent resistance, could break convincingly:

“Once it breaks, I doubt we go back below anytime soon. Price discovery is close.”