Key takeaways:
The futures premium for Ether and its derivatives remain steady, showcasing resilience despite the recent price decline.
Onchain metrics emphasize Ethereum’s leading position in fees and total value locked (TVL), indicating stronger long-term recovery prospects.
Ether (ETH) seems to have found support around $4,070 on Wednesday following a sharp six-day drop of 15.1%. This decline wiped out $817 million in bullish leveraged positions but did not trigger a significant bearish market shift. Instead, the behavior of ETH derivatives suggests that traders remain optimistic about avoiding further downside, indicating that $4,700 is still a feasible target.
The annualized futures premium for ETH has remained above the neutral 5% mark during the decline, indicating ongoing confidence. Typically, monthly futures trade higher than spot markets due to longer settlement periods, yet the last significant bullish signal from this metric appeared in January. Even the substantial 100% ETH rally from July 1 to August 13 failed to fully revive trader optimism.
Economic uncertainty affects investor sentiment
This reluctance is partly due to macroeconomic uncertainties. US inflation remains above the Federal Reserve’s target of 2%, while economic growth displays mixed signals. The Nasdaq Composite experienced a decline for the second consecutive session on Wednesday, driven by concerns over the possible overvaluation of artificial intelligence stocks.
CNBC reported that traders are reducing positions ahead of US Federal Reserve Chair Jerome Powell’s comments on Friday. “A more hawkish tone from Powell could further pressure tech stocks,” noted Carol Schleif, chief market strategist at BMO Private Wealth. Additionally, retailer Target’s disappointing earnings highlighted profitability concerns.
Unexpectedly, ETH options present a neutral outlook, with a balanced demand for both downside and upside protection. The current 4% figure signifies an equal distribution between put (sell) and call (buy) interest. However, the lack of heightened optimism following ETH’s brief trade above $4,700 raises concerns, as it reflects a reluctance to anticipate a new all-time high.
Ethereum onchain activity indicates increased ETH demand
Onchain metrics present a more positive scenario. Ethereum continues to expand its lead over competitors, holding approximately 60% of the market’s total value locked (TVL), as reported by DefiLlama. Notably, network fees are rising, signifying increasing demand for blockspace, which bolsters Ether’s price recovery.
Ethereum’s 7-day fees surged to $11.2 million on Wednesday, marking a 38% increase from the previous week. In contrast, Solana’s fees rose merely by 3%, while BNB Chain’s revenues dipped by 3%. This disparity underscores Ethereum’s dominance in decentralized exchange volumes, which reached $129.7 billion in the last 30 days, as per DefiLlama.
Related: Bitcoin, Ether ETFs face nearly $1B outflows as prices plummet
Although Ether derivatives indicate a cautious stance, this perspective is reflective of the broader crypto market correction, rather than Ethereum’s fundamentals. Traders seem apprehensive that US import tariffs might stifle global growth, pushing investors toward a risk-averse posture.
Ultimately, ETH’s journey back to $4,700 depends on reduced investor anxiety regarding the economy. Nevertheless, derivatives data suggest that professional traders remain steady, showing no signs of panic following the $4,100 retest, reinforcing the notion that Ether’s recovery is based on stronger fundamentals than many had initially believed.
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.
