On May 15, the total market capitalization of the cryptocurrency market increased by 5.5% following the release of US inflation and retail sales data. However, Ether (ETH) failed to fully capitalize on this bullish momentum. Ether last closed above $3,000 five days ago and has underperformed leading cryptocurrency Bitcoin (BTC) by 22% since early 2024.
US macroeconomic data supports gains in some scarce assets
Cryptocurrency markets reacted positively to April US Consumer Price Index (CPI) data, rising 3.4% year-on-year, which was in line with market expectations. However, April retail sales figures released on May 15 showed a stable month-on-month trend, contrary to economists’ predictions of a 0.4% increase, making investors anxious. These developments have increased the likelihood that the U.S. Federal Reserve will implement measures to stimulate the economy.
Even if the Federal Reserve decides to keep interest rates above 5.25% for an extended period of time to curb inflation, the central bank could take steps such as buying Treasury bonds to increase the money supply and lowering the discount rate at which banks borrow from the central bank. bank. In essence, even a hint of continued liquidity provision can shape economic expectations and behavior.
Contrary to expectations, weakening economic activity is often seen as an indicator that more money will be pumped into the system, which is helpful for investing in scarce assets such as stocks, gold, and cryptocurrencies. Ultimately, the government will have to issue more debt to finance these expansionary measures to stave off a recession. Over time, inflation is likely to rise due to additional money circulation, regardless of interest rates.
Some analysts believe that the U.S. Securities and Exchange Commission’s (SEC) decision scheduled for May 23rd regarding the application of VanEck’s spot Ethereum ETF is the main reason for Ethereum’s failure to break above the $3,000 resistance level. The uncertainty surrounding this event causes traders to postpone investment decisions until the outcome becomes more certain, which is logical. No matter how optimistic you are about Ethereum’s long-term prospects, the SEC’s rejection could lead to a short-term market correction.
Eric Balchunas, senior ETF analyst at Bloomberg, expressed doubts about the approval of a spot Ethereum ETF in 2024 given the regulator’s cautious approach to products that can be classified as securities, especially those that include native staking services. . This skepticism is also evident in the Ethereum derivatives market.
Ethereum derivatives markets reflect a lack of optimism.
It is important to research the ETH futures and options market to understand where professional traders stand. In neutral market conditions, Ether futures contracts are typically priced 5% to 10% above the regular ETH spot price, taking into account the extended settlement period.
The current Ethereum futures premium (base rate) is 9%, maintaining a stable figure over the past two weeks. This level signals an overall lack of enthusiasm for spot ETF decisions, suggesting a neutral sentiment among traders.
In the options market, demand for call (buy) and put (sell) options is evenly balanced. This is because both types of instruments trade at similar price levels. Typically, the 25% delta skew metric will exceed 7% if traders expect the price of Ether to decline. Conversely, periods of significant market excitement often result in negative skewness of 7%.
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If demand for bullish trades had increased in anticipation of the spot Ethereum ETF decision, whales and market makers would likely have increased the prices of contracts providing rising price protection. This reflects the intention to capitalize on expectations of higher future prices and traders’ willingness to pay more for potential profits.
While it is difficult to pinpoint the exact reason why Ethereum is unable to capitalize on its current gains in the cryptocurrency sector, ETH investors do not seem particularly optimistic about the chances of a spot Ethereum ETF being approved. Additionally, other factors could also contribute to keeping the price of ETH below $3,000, such as ETH supply experiencing inflation for the first time in 18 months due to lower transaction fees.
This article does not contain investment advice or recommendations. All investment and trading activities involve risk and readers should conduct their own research when making any decisions.