Ethereum is at $2,000 but may still be under pressure as traders watch corporate earnings, U.S. government debt and rising global tensions.
Key Takeaways:
Institutional demand for Ethereum is cooling as investors move toward the safety of short-term U.S. Treasury bonds.
High interest rates and increasing ETH supply make current staking yields less attractive for long-term holders.
Ether (ETH) price has failed to maintain levels above $2,150 since February 5, leaving traders fearful of a further correction. Investment sentiment worsened due to outflow of Ethereum exchange traded funds (ETFs) and increased demand for put options.
The US-listed Ether ETF recorded net outflows of $242 million between Wednesday and Thursday, reversing the trend of the previous two days. Following a 20% recovery in Ethereum’s price from its bottom at $1,744 on February 6, institutional demand has faded as investors point to discrepancies in U.S. economic growth. This has become evident as demand for short-term U.S. Treasury securities has increased.
Yields on two-year U.S. Treasury notes fell to 3.42% on Friday, reaching their lowest level since August 2022. The increased demand for government-backed debt reflects traders’ expectations of further interest rate cuts from the U.S. Federal Reserve throughout 2026. Signs of a recession reduce the risk of inflation, paving the way for expansionist measures.
Regardless of macroeconomic trends, Ether has underperformed the broader cryptocurrency market, leading traders to question whether Ethereum still has the ability to compete with networks that offer base layer scalability and faster on-chain activity.
Traders are concerned that ETH prices will fall further, but the data appears to reflect recent price weakness rather than expectations of further falls.
Ether prices have fallen 38% in 30 days, putting negative pressure on network fees and ultimately reducing incentives for staking. Long-term holding is an important factor for sustainable price growth, and the current 2.9% staking yield is not very attractive considering the US Federal Reserve’s target interest rate of 3.5%. Additionally, ETH supply is growing at 0.8% per year.
ETH derivatives indicators reflect traders’ fears of further price declines.
Professional traders are not comfortable with falling price exposure according to ETH derivatives indicators, which further reinforces the bearish sentiment.
ETH options delta skewness on Friday was 10%, meaning the put options were trading at a premium. The indicator has surpassed the 6% threshold that has been the norm over the past two weeks, as demand for neutral to bearish strategies grows. Trader sentiment reflects a six-month bear market as ETH trades 58% below its all-time high.
relevant: Cryptocurrency investment sentiment will increase if the CLARITY Act is passed – Bessent
To put things into perspective, the Ether ETF’s $242 million outflow represents less than 2% of its total $12.7 billion assets under management. Therefore, traders should not assume that ETH price has entered a death spiral. Investor morale will eventually recover as the network remains the absolute leader in Total Value Locked (TVL).
Traders’ attention will continue to be focused on corporate earnings results and whether the U.S. government can repay its debt amid heightened global socioeconomic tensions. In this scenario, ETH price is likely to remain under pressure regardless of on-chain and derivatives indicators.
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. While Cointelegraph strives to provide accurate and timely information, Cointelegraph does not guarantee the accuracy, completeness or reliability of the information contained in this article. This article may contain forward-looking statements that involve risks and uncertainties. Cointelegraph will not be liable for any loss or damage arising from your reliance on this information.