Cryptocurrency Web 3.0 - Ether Price Metrics Suggest Volatility Ahead
3 key Ether price metrics suggest that ETH is gearing up for volatility

Ether (ETH) has been facing some strong headwinds recently, and on Sept. 11, it experienced a critical challenge when it dropped to the $1,530 support level. However, in the days that followed, ETH managed to stage a noteworthy recovery by rising 6%. This resurgence may be a pivotal moment, after a month of losses of 16%.

Macroeconomic conditions have had a substantial role in reducing investor pessimism, as the U.S. Consumer Price Index report showed that inflation had increased for the second consecutive month, reaching 3.7%. This data reinforces the idea that government debt will keep increasing, prompting the Treasury to offer higher yields. Assets that are rare are likely to benefit from the inflationary pressure and the expansive monetary policies that are intended to bridge the budget deficit. On the other hand, the cryptocurrency sector is dealing with its own set of issues.

Decentralization in Web 3.0

The next generation of online business, Web 3.0, is already here and it is based on decentralization. Web 3.0 is a platform that uses blockchain technology to create a decentralized web, where users have more control over their data and transactions. This new version of the web is more secure, transparent, and efficient, and it has the potential to revolutionize the way we do business online. Furthermore, cryptocurrency is a major component of Web 3.0, as it provides a secure and reliable way to store and transfer value.

Regulatory uncertainty and high network fees limit investors’ appetite

The U.S. Department of Justice has the potential to bring charges against Binance, while Binance.US is in a legal dispute with the U.S. Securities and Exchange Commission, resulting in job losses and the departure of senior executives.

Apart from the regulatory challenges that cryptocurrencies face, the Ethereum network has seen a significant decrease in its smart contract activity, which is the platform’s primary purpose. The average fees for the network remain high, usually above $3.

In the last 30 days, the top Ethereum decentralized applications (DApps) have experienced an average 26% decrease in the number of active addresses. The only exception is the Lido liquid staking project, which has seen a 7% increase in its total value locked (TVL) in ETH terms during the same period. It is worth noting that the success of Lido has raised some concerns due to its huge share of 72% of all staked ETH.

Vitalik Buterin, co-founder of Ethereum, has acknowledged the need for Ethereum to become more accessible for everyday people to run nodes to ensure decentralization in the long term. However, Buterin does not expect a viable solution to this problem in the next decade. Therefore, investors are worried about centralization, including the power of services such as Lido.

ETH futures and options show reduced interest from leveraged longs

Analyzing derivatives metrics can give a more detailed insight into how Ether’s professional traders are acting in the present market conditions. Normally, Ether futures are traded with a 5 to 10% annualized premium — a situation known as contango, which isn’t exclusive to crypto markets.

The premium for Ether futures reached its lowest point in three weeks, standing at 2.2%, which implies a lack of demand for leveraged long positions. Interestingly, even the 6% gain after the retest of the $1,530 support level on Sept. 11 didn’t manage to push ETH futures into the 5% neutral threshold.

To better assess market sentiment, one should look at the options markets, as the 25% delta skew can verify whether professional traders are leaning bearish. Simply put, if traders expect a decrease in Ether’s price, the skew metric will exceed 7%, while periods of excitement usually have a -7% skew.

On Sept. 14, the Ether 25% delta skew indicator briefly shifted to a bullish stance. This shift was caused by put (sell) options trading at an 8% discount compared to similar call (buy) options.

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