Ether (ETH) price faced significant challenges recently, reaching a critical support level of $1,530 on September 11. However, the altcoin managed to make an impressive recovery in the following days, surging by 6%. This recovery could be a pivotal moment for Ether after a month of enduring 16% losses.
Investors are now questioning whether Ether has the potential to climb back to $1,850, and they believe that ETH derivatives and network activity might hold the key to this puzzle. While the macroeconomic factors, such as rising inflation in the United States, have helped mitigate investor pessimism, the cryptocurrency sector faces its own set of challenges.
Regulatory uncertainty and high network fees have dampened investors’ appetites. The possibility of Binance exchange facing indictment by the U.S. Department of Justice and its ongoing legal battles with the Securities and Exchange Commission (SEC) have created uncertainty in the market. Additionally, the Ethereum network has seen a decline in its smart contract activity, which is at the core of its original purpose. Persistently high average fees above $3 further add to the challenges.
In the past month, the top Ethereum decentralized applications (dApps) have experienced a 26% decrease in the number of active addresses, except for the Lido (LDO) liquid staking project, which saw a 7% increase in total value locked (TVL) in ETH terms. However, Lido’s dominance, accounting for 72% of all staked ETH, has faced criticism for its potential centralization.
Vitalik Buterin, the co-founder of Ethereum, acknowledges the need for Ethereum to become more accessible to maintain decentralization in the long term. However, he does not anticipate a viable solution to this challenge within the next decade. Concerns about centralization, including the influence of services like Lido, have raised legitimate concerns among investors.
Looking at derivatives metrics, Ether futures typically trade at a 5 to 10% annualized premium. However, the premium for Ether futures hit its lowest point in three weeks, standing at 2.2%, indicating a lack of demand for leveraged long positions. Even the 6% gain following the retest of the $1,530 support level on September 11 failed to push ETH futures into the 5% neutral threshold.
To gauge market sentiment better, one should look at the options markets. The 25% delta skew can confirm whether professional traders are leaning bearish or bullish. On September 14, the Ether 25% delta skew indicator briefly shifted to a bullish stance, driven by put options trading at an 8% discount compared to call options. However, this sentiment waned on September 15, with both call and put options now trading at a similar premium. This reduced interest in leverage long positions suggests that Ether derivatives traders are not optimistic, despite defending the $1,530 price level.
While there are potential catalysts for Ether, such as requests for a spot ETH exchange-traded fund (ETF) and macroeconomic factors driven by inflationary pressure, the dwindling use of dApps and ongoing regulatory uncertainties create a fertile ground for fear, uncertainty, and doubt (FUD). This is likely to continue exerting downward pressure on Ether’s price, making a rally to $1,850 in the short to medium term appear unlikely.
Disclaimer: The views, thoughts, and opinions expressed in this article are solely those of the author and do not necessarily reflect or represent the views and opinions of Cointelegraph. This article is for general information purposes and should not be taken as legal or investment advice.
Source link