Ether (ETH) price has recently seen a 6.4% increase from its March 30 low of $1,768, yet the cryptocurrency continues to face challenges in regaining the crucial $2,000 level. Analysts suggest that this ongoing downturn may be partly linked to the declining memecoin market, which, while not exclusive to the Ethereum network, has significantly impacted activity across decentralized applications (DApps) and the broader cryptocurrency ecosystem.
As it currently stands, Ether’s year-to-date performance shows a 44% decline, and indicators from derivatives markets reveal that traders remain skeptical about a robust recovery in the near future. The widening premium on Ether futures compared to spot markets reflects this sentiment. Although it increased to 4% on April 2 from 2% on March 31, it still falls short of the neutral 5% threshold, suggesting that investor confidence in Ether remains low despite support building around the $1,800 price level.
Ether 2-month futures annualized premium. Source: Laevitas.ch
To further gauge the confidence of significant market players, one must examine the ETH options market. In typical conditions, the 25% delta skew between call (buy) and put (sell) options should be relatively balanced, normally ranging from -6% to 6%. Currently, the delta skew for Ether has decreased from a 9% level seen on March 31 to a 7%, indicating strong risk aversion among whales. This uptick in hedging costs implies a prevailing sentiment of fear regarding potential further declines in Ether’s price.
Strong Ethereum Adoption Amidst DApp Revenue Drop
While the overwhelming drop in Ethereum DApp revenue—recording a staggering 49% decrease from January to March—can be blamed for much of Ether’s price struggles, it is crucial to note that the network’s advantages over traditional finance and its commanding position in decentralized finance (DeFi) remain intact. Notably, stablecoin holdings on Ethereum are approaching an all-time high of $124.5 billion, and Ethereum continues to dominate the space with a total value locked (TVL) of $49 billion. This suggests promising horizons for ETH adoption, especially given the emergence of new use cases, including sophisticated DeFi applications leveraging synthetic assets.
Despite early obstacles faced by metaverse applications and declining interest in memecoins along with a sharp decrease in non-fungible token (NFT) marketplace activity, it is encouraging to see that the Ethereum network continues to expand and innovate.
ETH Funding Rate Remains Neutral as ETF Sentiment Erodes Retail Interest
A comprehensive view of market sentiment cannot ignore retail investors’ positions. Perpetual futures, or inverse swaps, generally mirror spot prices closely, with leverage adjustments reflected through a fee, known as the funding rate, charged every eight hours. In energizing yet neutral markets, this rate typically fluctuates between 0.1% and 0.3% over a week.
Ether 8-hour perpetual futures funding rate. Source: Laevitas.ch
Currently, the ETH perpetual funding rate has remained neutral since March 31, demonstrating that retail traders are not inclined to catch a falling knife. This lack of exuberance can largely be attributed to recent outflows from spot Ether exchange-traded funds (ETFs), which recorded $37 million in net withdrawals over the past fortnight.
While derivatives data tends to reflect historical sentiment and does not inherently indicate future price drops for ETH, it remains vital to watch for shifts in investor sentiment, especially in light of positive developments such as increased investments from notable figures like the Trump family into ETH and vocal endorsements for the cryptocurrency. Therefore, both professional and retail traders currently exhibit caution regarding ETH’s price outlook.
This article is for general information purposes and is not intended to be and should not be taken as legal or investment advice. The views, thoughts, and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.
