Is This an Ethereum Bull Market? Why Are Spot Markets Dying While Derivatives Soar?

▲ Ethereum (ETH) ©Godasol

Despite bullish signals, the Ethereum market is being restructured into a risky setup characterized by 'spot weakness and derivatives overheating.'

According to cryptocurrency media outlet Bitcoinist on April 29 (local time), despite Ethereum (ETH) showing a price rebound, there's a clear shift where traders are focusing more on derivatives trading than spot trading.

In the recent market, derivatives trading is rapidly expanding while spot trading volume is decreasing. This indicates that short-term speculative trading using leverage, rather than simple buy-and-hold strategies, is dominating the market. Experts analyze that this structure makes the market more vulnerable, and volatility could rapidly expand due to liquidations or shifts in sentiment.

Arab Chain, a CryptoQuant contributor, explained this trend using the 'Ethereum Perp-Spot Volume Imbalance Z-score' based on Binance data. At that time, the ETH price was hovering around $2,322, and the perpetual futures trading volume reached approximately 4.47 million ETH, while the spot trading volume was only about 300 ETH. As a result, the volume imbalance score rose to 0.87, clearly indicating the dominance of the derivatives market.

Historically, such imbalances have stimulated investors' risk appetite, leading to greater volatility. Specifically, as leveraged positions accumulate, the likelihood of large-scale liquidations increases, potentially creating an environment of repeated sharp rises and falls in short periods. Conversely, weak spot trading signifies a slowdown in long-term investment demand, which acts as a negative factor in maintaining a stable upward trend.

However, Ethereum's fundamentals are still considered strong. According to Santiment data, the number of non-empty wallet addresses on the Ethereum network totals 189.49 million, securing a holder base 3.2 times larger than Bitcoin. This demonstrates that Ethereum is establishing itself as a core foundational asset for the Web3 ecosystem, beyond being a mere store of value.

*Disclaimer: This article is for investment reference only, and we are not responsible for investment losses based on it. The content should be interpreted for informational purposes only.*