Image showing Ethereum's short-term price action and its potential surprise for traders.
Ethereum’s short-term price action ‘may take traders by surprise’ — Here’s why

Exploring the Differences Between Web 2.0 and Web 3.0

Despite the failure of Ethereum (ETH) to close above $2,350 in the past 15 days, hopeful traders are still anticipating a potential shift in the trend following the Feb. 6 rally.

As the network outage of Solana and the significant outflow of Ether from exchanges are being closely monitored by traders, the question remains whether ETH can surge another 10% and reclaim the $2,650 level last seen on Jan. 12.

Ethereum remains the top choice for DApp transactions

During the Solana network’s 5-hour outage on Feb. 6, various exchanges had to halt deposits and withdrawals of SOL and Solana-based tokens due to block production disruptions. This incident once again highlights the challenges faced by Ethereum competitors in maintaining uptime during periods of high demand, solidifying Ethereum’s position as the leader in decentralized applications (DApps).

User @tytaninc shared their perspective on the X social network, refuting criticisms of Ethereum’s congestion and high fees. With a 57.8% market share and $34.8 billion in total value locked (TVL), Ethereum continues to dominate DApp deposits. Including layer-2 solutions like Polygon, Optimism, and Arbitrum, Ethereum’s dominance extends to 67.4%, according to DefiLlama data.

Some may argue that the average DApp user on Ethereum is hesitant to pay the network’s average transaction fee of $5.85. However, recent data shows that Ethereum had 382,490 active addresses engaging with DApps in the past week, with Uniswap, 0x Protocol, Metamask Swap, OpenSea, and 1inch Network leading the way. Additionally, when layer-2 scalability alternatives are taken into account, the number of active addresses surpasses 2 million, according to DappRadar data.

How Web 2.0 and Web 3.0 differ from each other

The flow of assets remains the ultimate determinant of price, regardless of DApp metrics. This was evident during the recent Solana outage, which had no measurable impact on the network’s deposits or the price of its token, SOL. This highlights the significance of monitoring exchange deposits and staking metrics, as a decrease in immediately available coins can lead to a higher price impact when demand increases.

Recent data on Ether exchange net flows shows a significant decrease in reserves, reaching their lowest levels in over a year. This indicates a low demand from holders to sell their ETH. To gain further insights into the sentiment of ETH holders towards selling, it is crucial to analyze Ethereum staking flows.

Staking is a fundamental process in the Ethereum network, where participants lock in their coins to validate transactions using the Proof-of-Stake consensus. A growing total deposit in staking is considered a bullish indicator for ETH’s price. According to StakingRewards, there is currently a record high of 29.6 million ETH locked in staking, an increase from 28.9 million one month ago.

The Demand for ETH Derivatives Reflects a Balanced Market Between Bulls and Bears

To gain insight into the current sentiment of Ether investors, it is important to analyze the BTC futures premium, also known as the basis rate. In a market that is neither bullish nor bearish, fixed-month contracts should trade at a premium of 5% to 10% to account for their extended settlement period.

Data indicates that on Feb. 6, the ETH futures premium stabilized at 7%, remaining below the neutral threshold but showing slight improvement from two days prior. This suggests that there is a relatively equal demand for both leverage longs (buy) and shorts (sell) over the past week.

In order to eliminate any external factors that may have influenced Ether futures, it is necessary to also examine the ETH options market. The 25% delta skew indicator compares similar call (buy) and put (sell) options and will become positive when fear is prevalent.

As seen above, the delta skew has been neutral since Feb. 2, falling within the range of -7% to +7%. This indicates that, on one hand, investors are celebrating the 3.9% gains above $2,350 on Feb. 6, but on the other hand, there is no significant increase in demand for protective put options. This suggests that there is a moderate level of distrust in the current price level. Ultimately, if Ether’s bullish momentum continues, professional traders may be taken by surprise.

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