Key takeaways:
Traders are hedging aggressively, as indicated by the ETH futures premium and put options skew, despite an 8% price rise.
Ethereum’s weekly fees dropped by 49% due to reduced DEX activity, while fees for Tron and Solana increased by 9%.
On Tuesday, Ether (ETH) rose by 8% but faced resistance around $3,000, with derivatives markets showing skepticism about further gains. This uptick was in line with a broader cryptocurrency rally, influenced by traders anticipating better chances of new economic stimulus following recent stress in Japan’s government-bond market.
Investor sentiment improved as confidence grew that the US monetary policy might become less restrictive. The Federal Reserve (Fed) concluded its balance-sheet reduction program on Dec. 1, and there are expectations for an interest-rate cut on Dec. 10. Notably, major US financial institutions have significantly increased their utilization of repurchase agreements, which adds liquidity to short-term funding markets.
The Nasdaq index has nearly recovered from its November losses, now trading just around 3% below its all-time high. Nonetheless, ETH derivatives positioning remains tight, suggesting a lack of strong conviction among bullish traders.
On Tuesday, the annualized premium on ETH monthly futures compared to spot markets remained at 3%, unchanged from the previous week. Readings under 5% indicate very weak demand for leveraged long exposure, a reasonable outcome considering Ether’s 22% decline over the last 30 days.
Ether lags stocks as global policy turns expansionary
Ether’s relative underperformance against the US stock market raises concerns as central banks signal more expansionary economic strategies.
The Fed injected $13.5 billion through overnight funding on Dec. 1, marking the second-highest level in over five years. This liquidity backstop, which once managed over $2.5 trillion in spare cash in 2022, has seen its balances withdrawn as market participants seek higher returns elsewhere.
Additional factors potentially impacting crypto demand include worries about excessive investment in artificial-intelligence infrastructure and renewed regulatory scrutiny on stablecoins. Moreover, China’s central bank has emphasized its intent to intensify crackdowns on money laundering activities and unauthorized cross-border digital asset transfers.
Professional Ether traders remain cautious regarding downside risks, a sentiment reflected in ongoing stress within options markets.
ETH put (sell) options were trading at a 6% premium over comparable call (buy) options, a trend typically seen in bearish markets. By comparison, the skew metric was neutral at 4% on Friday. This change indicates lingering hesitance among traders, despite a rally in US equities suggesting an improved risk appetite across traditional markets.
Ethereum network fees fell to their lowest level in over three years, dropping to $2.6 million in a seven-day span, down from $5.1 million four weeks ago. This decrease is partly due to diminished activity on decentralized exchanges, which saw volumes decline to $13.4 billion in the same timeframe after peaking at $36.2 billion in August.
Related: Ether price analysis–Will ETH continue to decline in December?
More alarmingly, competing chains Tron and Solana experienced a 9% rise in seven-day fees, according to Nansen data. Additionally, an unusual movement of 40,000 ETH by a dormant whale from Ethereum’s genesis block on Sunday has raised investor concerns regarding a possible sale.
Ethereum’s Fusaka upgrade, set for Dec. 3, is a crucial step towards enhanced scalability and improved wallet management. However, a decline in demand for decentralized applications has led to lower fees. Currently, clear evidence that ETH is poised to outperform the wider cryptocurrency market remains limited.
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.
