The Ether (ETH) price plunged 33.9% from $3,203 on August 2 to $2,188 on August 5, reaching a seven-month low. The plunge followed a broader market correction in the cryptocurrency sector. However, with the Ether price recovering 23.7% from its August 5 low in less than 36 hours, traders are now questioning whether Ether can ever reclaim $3,000.
What does the market think about ETH?
To understand whether the rebound from the lows on August 5 is sustainable, it is essential to analyze what triggered the initial price decline. Some analysts suggest that the Japanese stock market began selling off after the Nikkei 225 lost 13% on August 5. This move followed the Bank of Japan’s decision to raise interest rates for the first time in 17 years on July 31.
The Nikkei 225 fell 4.6% on August 5, but the impact was felt across all markets. The S&P 500 fell 3%, while gold fell 2.7% from its August 5 high to $2,477. Ether’s decline was further accentuated by the inherent volatility of the crypto space and the excessive leverage used by ETH bulls. This imbalance also explains why Ether recovered to the $2,500 level on August 6.
Given that the S&P 500 is up 2.9% from its August 5 low, is there enough bullish momentum for Ether to recover to $3,000 last week? From a macro perspective, uncertainty persists after major tech companies including Microsoft and Intel reported Q2 earnings that were below market estimates. The entire AI sector is also under the spotlight, with Nvidia stock trading 25% below its all-time high. Recent weak U.S. jobs data has further dampened investor sentiment.
To gauge whether ETH traders are bullish even after the turmoil, it is important to analyze ETH futures and options indicators along with the overall demand for Ethereum network usage based on on-chain indicators. For example, considering the longer settlement period, ETH monthly futures should trade 5% to 10% higher on an annual basis compared to the regular spot market.
Ether futures premiums briefly fell below the 5% neutral threshold on August 5, but remained above 6% later that day. While this is still below the 11% level a week ago, which would indicate bullish sentiment, the data suggests that there is balanced leverage demand between Ether bulls and bears using futures contracts.
Ether options markets and on-chain indicators showed moderate resilience.
We need to evaluate the Ether options market to see if this indicator is not an outlier influenced by cash and carry trades aimed at capturing fixed income profits. When fear prevails, put (sell) options trade at a premium over call (buy) options, resulting in a delta skew indicator of over 7%.
The ETH skew has moved to its highest level in almost three months at 1.8%, still within the neutral 7% threshold. In fact, the last time bullish sentiment dominated Ether options was on July 23, when the indicator dropped to -8%. This indicates that the Ether derivatives indicator has deteriorated slightly, but both futures and options reflect neutral sentiment.
Related: Ethereum’s Rapid Rebound Sees ETH Price Rise 100%
Finally, to understand whether demand for Ethereum decentralized applications has been affected by the price crash, we need to cross-check derivatives data with on-chain metrics. Total Value Locked (TVL), which measures deposits across the entire ecosystem, including staking, decentralized finance, marketplaces, and collectibles, increased to 19.2 million ETH on August 5, the highest level since November 2022, according to DefiLlama data.
In short, aside from the broad economic uncertainty and the overall risk market, there is nothing that could hinder the price recovery of Ether. If the S&P 500 continues to strengthen, there is a good chance that ETH will regain the $3,000 support from last week.
This article does not contain any investment advice or recommendations. All investment and trading moves involve risk, and readers should conduct their own research when making decisions.