Ethereum price data casts doubt on the strength of ETH’s support at $3K

The price of Ether (ETH) dropped by nearly a fifth (21%) from April 9 to April 14, reaching a 50-day low. Despite regaining some ground, Ether’s value remains uncertain as it struggles to surpass the $3,200 resistance level set on April 14. Skepticism among traders grows as they ponder if the $3,000 support will be sustainable.

Analysts are not optimistic about the spot Ether ETF approval odds

Investors exhibit a cautious sense of hope that the SEC will approve a Ether ETF this May. Yet, conflicting indicators from blockchain activity and derivatives markets hint at potential market corrections preceding the SEC’s ruling.

Jan van Eck, the CEO of investment firm VanEck, voiced uncertainty about the approval of Ether-based spot ETFs in May. He cited the Securities and Exchange Commission’s prolonged inaction on a stack of seven pending applications, which included bids from heavyweight firms like BlackRock, Fidelity, ARK Invest, and VanEck itself.

Eric Balchunas, senior ETF analyst at Bloomberg, pointed out that the lack of constructive criticism from the Securities and Exchange Commission (SEC), during their meetings, suggests a low probability of approval, approximately 35%. James Seyffart, another Bloomberg ETF analyst, commented, “It’s unusual for the SEC to take no action for months when we had been anticipating this.”

A simpler explanation might be that it’s too hasty to blame Ether’s recent drop solely on the uncertain future of a spot Ether ETF, as Bitcoin (BTC), the top cryptocurrency, declined by 14% in the five days prior to April 13 as well. Instead, a more comprehensive assessment would involve examining Ether’s performance relative to its main competitors, with a focus on those associated with decentralized applications (DApps).

Ethereum price data casts doubt on the strength of ETH’s support at $3K

Starting on April 9th, Ether experienced a more noticeable downturn with a 15% decrease compared to BNB‘s 8% drop and Tron’s 10% decline. In contrast, Solana faced a more pronounced fall. Nevertheless, these numbers don’t necessarily indicate the DApp usage within each network. Therefore, it is essential to analyze the trends in Total Value Locked (TVL) across these platforms instead.

Based on DefiLlama’s data, Ethereum’s total value locked in DeFi contracts hit a 13-month high of approximately 16.4 million ETH on April 15, representing a 14.8% rise from the previous month. In contrast, BNB Chain’s TVL remained relatively unchanged at around 9.5 million BNB, while Tron witnessed a 1% decrease in deposits during the 30 days leading up to April 15.

DApps activity and ETH derivatives offer a mixed prospect for price

Based on the preliminary assessment, it seems that the Ethereum network may have an edge over its rivals. However, a closer look is required as not all decentralized apps (DApps) necessitate large deposit amounts. To fully understand the network’s activity, it’s important to examine transaction volumes and user counts.

Ethereum price data casts doubt on the strength of ETH’s support at $3K

Based on DappRadar’s data, the Ethereum blockchain led the way with a weekly DApp volume of $45.7 billion, surpassing its primary competitor, BNB Chain, by a substantial margin. Although Ethereum experienced a slight 3% decrease in average unique active wallets (UAW) since April 9, this decline was less pronounced compared to the BNB Chain, which suffered a more significant 7% drop in UAW.

Examining the ETH options market can help determine if expert traders are growing more bearish towards Ether’s future. Typically, when the delta skew is over 7%, it signifies investors anticipate a decrease in price. On the other hand, a negative delta skew below -7% suggests they believe Ether will rise in value.

Ethereum price data casts doubt on the strength of ETH’s support at $3K

On the 16th of April, the options skew indicator for Ether hit its peak in over two months. This shift moved into bearish territory after remaining around 7% for a consecutive four-day period. This pattern implies that large investors and market makers are seeking to pay more for insurance against potential price drops in ETH.

The upcoming decision regarding an Ether ETF in May is fueling optimism and boosting Ether’s price. At the same time, while Ether’s on-chain activity has shown improvement compared to its rivals, it remains relatively low. On the other hand, heightened risk aversion among professional traders as of April 16, evident in derivatives markets, serves as a warning sign for potential further drops in ETH price below $2,900.

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2024-04-16 20:02