On-chain data shows that derivative exchanges have just received vast Ethereum deposits, which could lead to ETH price volatility.

Ethereum’s Netflow Exchange has seen explosive growth recently

As explained by an analyst at CryptoQuant Quicktake postExchange Netflow for ETH has seen a lot of growth recently. “Exchange Netflow” here refers to an on-chain metric that tracks the net amount of ETH flowing into or out of wallets associated with centralized exchanges.

When the value of this indicator is positive, it means that investors are depositing a certain number of net tokens on these platforms. How these transactions affect ETH depends on the exchange to which holders transfer their coins.

On spot exchanges, investors typically make deposits whenever they want to sell, so positive net flows from exchanging to these types of platforms can lead to a bearish outcome.

In the case of derivatives exchanges, which are the platforms relevant to the current discussion, the relationship with price is not so plain. Holders transfer their coins to these exchanges to open novel positions in the derivatives market.

Since novel positions are usually accompanied by some leverage, it can be assumed that the overall risk in the sector will raise when investors make deposits on derivatives exchanges. This may lead to greater ETH price volatility.

Negative net flow on an exchange is usually confident, regardless of the platforms involved, because it means that investors are moving their coins into self-directed wallets, potentially because they plan to hold them for the long term.

Here is a chart showing the trend in Ethereum Exchange network flow for derivatives platforms over the last few weeks:

As shown in the chart above, Ethereum Exchange Netflow has recently seen a vast raise in the positive direction, suggesting that investors have just made vast net deposits on derivatives platforms.

Thanks to this net inflow frenzy, holders transferred approximately 82,000 ETH to these exchanges. As mentioned earlier, this trend may lead to greater ETH volatility.

It’s strenuous to say what direction any emerging volatility might push the cryptocurrency, as other positive spikes over the past few months have proven mixed.

However, given that the recent spike coincided with a decline in Ethereum’s price, many of these could be tiny positions anticipating a further decline. If this happens, an upward swing could lead to the liquidation of these positions, which would add fuel to the rally.

ETH price

At the time of writing, Ethereum is trading around $2,400, down almost 7% over the past week.