Later dropping 27% over iii days, Ether (ETH) price finally reached a bottom at $1,040 on Jan. 22.

The sharp correction liquidated $600 billion worth of future contracts but interestingly, Ether price rebounded to a new all-time loftier even as Bitcoin price continues to trade in a slight downtrend.

According to Cointelegraph, the increasing TVL and transaction volumes of the decentralized finance sector are behind Ether'southward impressive surge.

ETH/USD 4-hour nautical chart. Source: TradingView

To make up one's mind whether the contempo pump reflects a potential local top, we'll take a closer look at on-chain flows and derivatives data.

Substitution withdrawals indicate to whale accumulation

Increasing withdrawals from exchanges can be caused by multiple factors, including staking, yield farming, and buyers sending coins to cold storage. Usually, a steady flow of net deposits signal a willingness to sell in the short-term. On the other mitt, internet withdrawals are generally related to periods of whale accumulation.

ETH held in substitution wallets. Source: Cryptoquant.com

Every bit the above chart shows, on January. 23, centralized exchanges recently reached their lowest Ether reserve levels since November 2018.

Although there is some discussion whether part of this Ether exodus is an internal transfer between Bitfinex common cold wallets, there has been a clear net withdrawal trend over the by month. Despite these 'rumors', the data points towards aggregating.

This data also coincides with the DeFi's total value locked (TVL) reaching a $26 billion all-time high and signals investors chose to take reward of the lucrative yield opportunities that exist outside of centralized exchanges.

Futures were overbought

Past measuring the expense gap between futures and the regular spot market, a trader can gauge the level of bullishness in the marketplace.

The 3-calendar month futures should commonly trade with a 6% to 20% annualized premium (ground) versus regular spot exchanges. Whenever this indicator fades or turns negative, this is an alarming cherry-red flag. This situation is known as backwardation and indicates that the market is turning bearish.

On the other hand, a sustainable basis above xx% signals excessive leverage from buyers, creating the potential for massive liquidations and eventual marketplace crashes.

March 2021 ETH futures premium. Source: NYDIG Digital Assets Data

The higher up chart shows that the premium peaked at vi.5% on January. 19, equal to a 38% annualized rate. This level is considered extremely overbought, every bit traders need an even higher cost increase alee of expiration to profit from it.

Overbought derivatives levels should be considered a yellow flag, although maintaining them for short periods is normal. Traders might momentarily exceed their regular leverage during the rally and later purchase the underlying nugget (Ether) to adjust the run a risk.

Ane way or some other, the market adapted itself during the Ether price crash, and the futures premium currently stands at a healthy iv.5% level, or 28% annualized.

Spot book remains potent and traders bought the dip

In addition to monitoring futures contracts, profitable traders also track book in the spot market. Typically, depression volumes indicate a lack of confidence. Therefore significant cost increases should be accompanied by robust trading activeness.

ETH aggregate spot exchanges volumes. Source: Coinalyze.net

Over the past week, Ether has averaged $6.one billion in daily volume, and while this effigy is far from the $12.iii billion all-fourth dimension high seen on Jan. 11, it is even so 240% higher than Dec's. Therefore, the activity supporting the recent $1,477 all-time loftier is a positive indicator.

Exchange-provided information highlights traders' long-to-short net positioning. Past analyzing every client's position on the spot, perpetual and futures contracts, ane can obtain a clearer view of whether professional person traders are leaning bullish or bearish.

With this said, there are occasional discrepancies in the methodologies between dissimilar exchanges so viewers should monitor changes instead of absolute figures.

Exchanges pinnacle traders ETH long-to-brusque ratio. Source: Bybt.com

The height traders index at Binance and Huobi have held roughly the same Ether position over the past couple of days. Huobi's average over the past 30 days has averaged a 0.83 long-to-short ratio while at Binance traders held a 0.94 average. The electric current reading at 0.85 indicates a slight negative sentiment.

OKEx stands out as the top traders long-to-brusk ratio peaked at 2.0, strongly favoring longs in the early hours of Jan. 22, but it decreased until Jan. 24 and finally bottomed at 1.05. The strong internet selling trend was reverted today as traders bought the dip and the indicator flipped to 1.17 in favor of longs.

1 should keep in mind that arbitrage desks and market makers encompass a vast portion of the exchanges' top traders metric. The unusually high futures premium would incentivize those clients to create short positions in futures contracts while simultaneously buying Ether spot positions.

Considering Ether's on-chain data indicating whales hoarding, forth with the salubrious futures contracts premium, the marketplace structure seems reliable.

The fact that top traders at OKEx likewise bought today's dip is further indication that the rally should encounter continuation.

The views and opinions expressed here are solely those of the autho r and practise not necessarily reflect the views of Cointelegraph. Every investment and trading motion involves hazard. Y'all should acquit your ain research when making a conclusion.