Ether (ETH) encountered a strong obstacle at $1,920 following a 17.5% surge between June 15 and June 22. A variety of elements hindered the restricted upside, including deteriorating macroeconomic conditions, a stricter regulatory cryptocurrency landscape, and a decrease in demand for decentralized applications (DApps) on the Ethereum network.
ETH price faces macroeconomic headwinds
A federal judge on June 26th rejected a request from Binance that would have prevented the Securities and Exchange Commission of the United States from making any public declarations concerning the case.
In its mid-year outlook, HSBC Asset Management’s report cautioned of a possible economic downturn in the U.S. in the fourth quarter, followed by a year of contraction and a European recession in 2024. Additionally, the report highlighted that corporate defaults have begun to increase.
Gita Gopinath, the Chief Economist for the International Monetary Fund, advised central bankers in an interview with CNBC on June 27th that they should maintain higher interest rates for a longer period of time than initially anticipated.
Ethereum network demand, gas fees drop
The usage of DApps on the Ethereum network did not pick up as gas fees declined by 60%. Notably, the seven-day average transaction cost fell to $3.7 on June 26, compared to $9 from four weeks before.
The number of active addresses for DApps also decreased by 27% during the same time frame.
A major portion of the decrease was focused on Uniswap and MetaMask Swap, whereas most non-fungible token (NFT) marketplaces experienced a rise in their distinct active wallets (UAW).
Despite UNiswap NFT Aggregator’s underwhelming performance, there was a notable influx of users to OpenSea, Blur, Manifold, LooksRare and Unick within the sector.
The TVL (Total Value Locked), which measures the deposits locked in Ethereum’s smart contracts, has reached its lowest point since August 2020, causing concern. Between April 28 and June 28, the indicator dropped 6.9% to 13.9 million ETH, according to DefiLlama.
ETH price rally not supported by derivatives markets
Let us take a look at Ether futures to assess the likelihood of ETH/USD surpassing the $1,920 resistance. How are professional traders positioned for the upcoming ETH price move?
Whales and arbitrage desks tend to prefer quarterly futures of ETH.
Consequently, in healthy markets, ETH futures contracts should be priced at a 5 to 10% annualized premium, a phenomenon referred to as contango.
According to the futures premium, otherwise known as the basis indicator, professional traders have refrained from taking leveraged long positions (bullish bets). Despite the slight increase to 3%, the metric is still significantly lower than the neutral 5% level.
In order to eliminate any external factors that could have solely influenced Ether futures, it is necessary to analyze the ETH options markets. The 25% delta skew indicator examines analogous call (purchase) and put (sell) options and will become positive when fear is widespread since the protective put option premium is higher than the call options.
If traders fear an Ether price crash, the skew indicator will rise above 8%. Conversely, when there is a general enthusiasm, the skew will be at a negative 8%.
As shown above, the delta skew has been exhibiting mild optimism since June 22, yet it has not been able to maintain it for an extended period of time. Currently, the negative 2% measure reflects an even demand for options.
Resistance below $2,000 remains formidable
The ETH derivatives metrics, decreasing Total Value Locked (TVL) and Dapps usage suggest that bears are more likely to successfully protect the $1,920 resistance. Furthermore, the deteriorating macroeconomic situation and recent crypto regulatory news leads to a moderate bearishness for risk-on assets such as Ether.
Three explanations for why Ethereum’s market capitalization is increasing.
It is not guaranteed that Ether will revisit the $1,750 mark, but it is clear that ETH bulls have a major obstacle to overcome after their unsuccessful attempts to surpass the $1,920 level between June 21 and June 25.
In the short term, it appears that Ethereum bears have a higher chance of preserving this significant price point.
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