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Key takeaways:
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Capital rotation favors Ether as “Hot Capital Ratio” hits a yearly low for Solana.
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ETH futures dominance grows with open interest hitting $58 billion.
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ETH eyes $4,000, backed by low funding rates and strong spot accumulation.
Capital flows favor Ethereum over Solana
Ether (ETH) has emerged as the primary beneficiary of capital rotation within the altcoin market.
According to Glassnode, the SOL/ETH Hot Capital Ratio, a measure of short-term realized capital movement, has declined to a year-to-date low of 0.045, marking a 42% drop since April.
This suggests that while ETH and SOL saw inflows in July, capital flow is now favoring Ether.
The Hot Realized Cap metric shows which asset short-term speculators are favoring. With the ETH/SOL trading pair in a multimonth downtrend, the data signals “a fading but notable ETH-led rotation,” Glassnode said.
Another bullish sign for Ether is the ETH/BTC pair, which is also back to multimonth highs, rising above the 200-day exponential moving average for the first time in over two years.
As Cointelegraph reported, ETH price rebounded to its average trading range while Bitcoin continues to face heavy selling at $116,000 and below.
Ether funding rates stay cool
Ether’s open interest (OI) recently reached an all-time high of $58 billion. This surge in OI, alongside Ethereum’s record-high daily transaction count, reflects more money entering the market and increasing network participation.
Additionally, Ethereum’s share of total OI across major exchanges has climbed to 34.8%, while Bitcoin’s declined from 59.3% to 47.1%.
However, while ETH has yet to reclaim the key $4,000 resistance level, futures funding rates suggest the rally has room to run.
Current aggregated funding rates remain significantly lower than during previous attempts to breach $4,000 in March and December 2024. In fact, compared to March, funding rates have nearly halved.
This dynamic is bullish for two key reasons: First, lower funding rates indicate that traders are not overly leveraged to the long side, reducing the risk of sudden liquidation.
Second, it shows that the current price action is being driven more by spot demand (led by Ether treasury companies) rather than excessive speculative positioning.
In fact, NovaDius president Nate Geraci highlights,
“Eth treasury companies & spot eth ETFs have *each* bought approx 1.6% of current total eth supply since beginning of June.”
Related: Ether price headed for $4K showdown: Is this time different?
Ether price corrected by 9.72% over the past seven days after rallying for five consecutive weeks. ETH has swiftly recovered 9% since, retesting $3,800 on Thursday.
With $4,000 in sight, crypto analyst Jelle notes that the psychological level “has been resistance since forever.” The analyst said:
“Once it breaks, I doubt we go back below anytime soon. Price discovery is close.”
This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.
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