Quant Explains How These Indicators Affect Ethereum Price

Keshav Verma

1 year ago

3 mins read

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A quant has explained how the indicators like taker buy/sell ratio and Coinbase premium index can influence the price of Ethereum.

Ethereum’s Relationship With Taker Buy/Sell Ratio & Coinbase Premium Index

In a new CryptoQuant quicktake post, an analyst has discussed some metrics that could hold relevance for the ETH price. The first indicator of interest here is the “taker buy/sell ratio,” which tells us about the ratio between the Ethereum buy and sell orders in the market right now.

When this metric has a value greater than 1, it means that the taker buy volume is higher than the taker sell volume. Such a trend implies that the majority of the investors are bullish on the asset currently.

On the other hand, values below the threshold naturally imply the dominance of bearish sentiment, as there are currently more sell orders present on exchanges.

Now, here is a chart that shows the trend in the 50-day moving average (MA) Ethereum taker buy/sell ratio over the past few years:

The potential relationship between these indicators and the value of the cryptocurrency | Source: CryptoQuant

As you can see in the above graph, the quant has highlighted the pattern that the Ethereum price and the 50-day MA taker buy/sell ratio have possibly followed during the past couple of years.

It would appear that whenever the value of the asset has rallied, the taker buy/sell ratio has gone down. This would suggest that the sell orders on the market pile up as the ETH price trends up.

The analyst notes that this is naturally because the investors become more cautious as the price continues to rise since they think a correction may be coming soon.

The sell orders continue until the cryptocurrency has topped out, and once the decline hits the asset, the buy orders start going up instead.

From the chart, it’s visible that significant accumulation periods have generally paved the way for the price to bottom out and begin another rally.

The quant has also attached data for another metric: the Coinbase Premium Index. This indicator keeps track of the difference in the Ethereum prices listed on Coinbase and Binance.

Whenever this metric has a positive value, it means that the Coinbase platform has BTC listed at a higher price than Binance currently. This implies that buying pressure has been stronger from US-based investors, who usually use the former exchange. Similarly, negative values imply just the opposite.

According to the analyst, major fluctuations in the Ethereum price have generally come with strong changes in the Coinbase premium index, a possible sign that activity on the exchange is the driver for these price moves.

Currently, the 50-day MA taker buy/sell ratio is at relatively low values and is looking to turn around, although this trend shift towards buy order dominance isn’t confirmed just yet.

The Coinbase Premium Index is at neutral values, implying that there hasn’t been any trading activity happening on the platform that’s different from Binance. Given these trends, it’s possible that Ethereum may not see any big moves in the near future.

ETH Price

At the time of writing, Ethereum is trading around $1,830, up 2% in the last week.

ETH has erased its gains from yesterday | Source: ETHUSD on TradingView

Featured image from DrawKit Illustrations on Unsplash.com, charts from TradingView.com, CryptoQuant.com

Keshav Verma

Keshav is currently a senior writer at NewsBTC and has been attached to the website since June 14, 2021.

Keshav has been writing for many years, first as a hobbyist and later as a freelancer. He has experience working in a variety of niches, even fiction at one point, but the cryptocurrency industry has been the longest he has been attached to.

In terms of official educational qualifications, Keshav holds a bachelor’s degree in Physics from one of the premier institutes of India, the University of Delhi (DU). He started the degree with an aim of eventually making a career in Physics, but the onset of COVID led to a shift in plans. The virus meant that the college classes had to be delivered in the online-mode and with it came free time for him to explore other passions.

Initially only seeking to make some beer money, Keshav unexpectedly landed clients offering real projects, after which there was no looking back. Writing was something he had always enjoyed and to be able to do it for a living was like a dream come true.

Keshav completed his Physics degree in 2022 and has been focusing on his writing career since, but that doesn’t mean his passion for Physics has ended. He eventually plans to re-enter university to obtain a masters degree in the same field, but perhaps only to satiate his own interest rather than for using it as a means to find employment..

Keshav has found blockchain and its concepts fascinating ever since he started going down the rabbit-hole back in 2020. On-chain analysis in particular has been something he likes to research more about, which is why his NewsBTC pieces tend to involve it in some form.

Being of the science background, Keshav likes if concepts are clear and consistent, so he generally explains the indicators he talks about in a bit of detail so that the readers can perhaps come out having understood and learnt something new.

As for hobbies, Keshav is super into football, anime, and videogames. He enjoys football not only as a watcher, but also as a player. For games, Keshav generally tends towards enjoying singleplayer adventures, with EA FC (formerly FIFA) being the only online game he is active in. Though, perhaps due to being ultra-focused on the game, he is today a semi-pro on the EA FC scene, regularly participating in tournaments and sometimes even taking back prize money.

Because of his enthusiasm for anime and games, he also self-learned Japanese along the way to consume some of the untranslated gems out there. The skill didn’t merely remain as just a hobby, either, as he put it to productive use during his exploration for small-time gigs at the start of COVID, fulfilling a couple of Japanese-to-English translation jobs.

Keshav is also big into fitness, with agility and acceleration-related workouts making a big part of his program due to the relevance they have in football. On top of that, he also has a more traditional strength based program for the gym, which he does to maintain an overall fitness level of his body.

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