From January 6th to January 13th, Ethereum (ETH) saw a 20.7% decrease, dipping to $2,924, which led to liquidations of approximately $395 million in leveraged long ETH positions. This downturn seemed to dampen bullish expectations; however, data from Ether derivatives indicates robust interest not only among retail investors but also among institutional buyers.
As a researcher examining Ethereum markets, I’ve observed that in neutral conditions, the monthly futures premium for ETH tends to hover around 5% to 10% higher than the regular spot prices. This discrepancy can be attributed to the longer settlement period associated with futures contracts.
Even though Ethereum’s price has dipped below $3,000 recently, this specific indicator has managed to stay above the threshold. This suggests that influential market participants like whales and market makers maintain a positive outlook on Ethereum’s future price movements.
Despite a 42.7% increase for Ether in 2024, the overall attitude among traders remains reserved. The asset didn’t manage to surpass its previous record high, peaking at $4,105 on December 16. Furthermore, Ethereum’s main rivals, Solana (SOL) and BNB (BNB), have outdone Ether by 2% so far in 2025, which could be fueling the traders’ lack of enthusiasm. This underperformance seems to mirror the price trends observed.
The monthly Ether futures funding rate remained constant at a level of 0.6%, slightly lower than the 0.9% seen two weeks prior but still within the neutral range of 0.5% to 1.5%. Normally, negative sentiment about Ether would cause this indicator to drop below zero, which means that short sellers would have to pay fees or costs.
ETH faces resistance at $3,200, delaying confidence in a sustained rally
At the $3,000 mark, ETH derivatives markets indicate only modest downward pressure. Yet, the inability to regain the $3,200 point on January 14 suggests possible setbacks in maintaining a robust upward trend towards $3,600. Overcoming several hurdles is essential before investors can feel secure about a lasting market recovery.
On average, transaction fees on the Ethereum network are quite steep at around $2.70, which is significantly higher than what’s seen on competitors like Solana and BNB. Critics, such as DefiIgnas, have voiced concerns on various platforms about several Ethereum layer-2 solutions. They claim that these solutions often fall short in terms of fairness, decentralization, and the distribution of value back to ETH itself. Instead, it’s alleged that companies managing these networks tend to reap the benefits themselves.
It’s been pointed out that there are worries about the security at layer 2. Hasu, who is a strategist for both Flashbots and Lido, expressed on X that “Layer-2 systems operate independently with their own rules and governance. Assets transferred between layers only retain the security of the base layer (Ethereum)”. This statement underscores a widespread misunderstanding that transactions at layer 2 enjoy the same level of security as Ethereum’s primary network.
Ether’s path to $3,600 depends on roadmap progress
The cost of transactions on the Ethereum network, including rewards for validators, decreased by 28% compared to the previous week, as reported by Dan Smith from Blockworks Research. On the other hand, Solana’s fees and tips increased by 22% during the same timeframe. Moreover, the total earnings and tips generated across all Ethereum layer-2 networks only reached $1.1 million in the last seven days.
Even with these hurdles, Ethereum stands as the top platform for decentralized applications (DApps), boasting a total value locked (TVL) of approximately $64.5 billion. In contrast, Solana, its main rival, has a TVL of around $8.6 billion. It’s worth mentioning that Ethereum’s layer-2 ecosystem accounts for $10.2 billion of the total TVL, demonstrating its increasing importance within the network.
Essentially, whether or not Ether can reach $3,600 or more is dependent on the advancements made according to Ethereum’s development plan. Due to the fact that many DeFi users are choosing centralized systems for cheaper fees, they are bypassing Ethereum’s decentralized principles. Consequently, while ETH derivatives markets exhibit a degree of optimism, it is not enough to substantially increase trader confidence in the near future.
In other words, this piece is meant to provide a broad understanding and isn’t intended nor designed to act as legal or financial guidance. The perspectives, assumptions, and judgments shared within this text are solely those of the author and might not align with the viewpoints or opinions of CryptoMoon as an entity.
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2025-01-14 22:57