Key takeaways:
ETH is facing selling pressure as $480 million in liquidations and falling network fees impact investor confidence.
ETH’s negative funding ratio could play a role in a potential rebound rally.
Ethereum (ETH) price underwent a 13.8% three-day correction, retesting the $2,900 support level on Wednesday for the first time in four weeks. The move follows a sharp decline across cryptocurrency markets as traders became more risk-averse amid worsening socioeconomic conditions.
ETH recovered to the $3,000 level after US President Donald Trump canceled import tariff increases for several European Union countries. But traders are worried about further declines after $480 million in bullish leveraged positions was liquidated in two days.
The funding rate for ETH perpetual futures briefly turned negative on Wednesday. This means that the seller (seller) has to pay a fee to maintain the position. In a neutral situation, this indicator should be between 6% and 12%, and the buyer (buyer) will have to pay the cost of leverage. However, lack of confidence is not necessarily a sign of weakness.
Traders are concerned that recent outflows from Ethereum spot exchange-traded funds (ETFs) have weakened institutional interest in Ethereum. These investment products currently hold over $17 billion of ETH, representing significant market overshoot.
The US-listed Ether ETF recorded net outflows of $230 million on Friday, reversing the previous week’s trend of average net inflows of $96 million. What’s more worrying is that companies focused on accumulating ETH as a reserve strategy are facing massive accounting losses, including Bitmine Immersion (BMNR US) and Sharplink (SBET US).
Is the bear responsible?
Professional traders need to evaluate the demand for ETH options to see if there is a bearish reversal. When whales and market makers fear further declines, the skewness indicator moves above 8% as put (sell) options trade at a premium to equivalent call (buy) instruments. In contrast, bull markets are typically followed by skew indicators below -8%.
According to ETH Options Distortion, traders are currently demanding a premium of 11%, the highest level in seven weeks, to maintain downside exposure. This indicator reflects the discomfort of traders after the price of ETH was rejected by $3,400 several times over the past 10 weeks, amid falling Ethereum network on-chain indicators.
According to Nansen, Ethereum network fees have decreased by 20% compared to last week. Meanwhile, competitor Solana experienced 36% higher fees, while BNB Chain experienced 27% higher fees. More importantly, Solana’s leadership in terms of trading volume remains undisputed, as the sum of its Ethereum base layer and scaling solutions remained below 570 million for seven days.
relevant: ETH whales bought the dip, but can the accumulator stop the decline to $2.7K?
Ether’s path to regaining $3,400 will largely depend on its economic visibility, including returns to its artificial intelligence infrastructure and the resolution of economic and geopolitical conflicts.
Given the lack of demand for leveraged bullish ETH positions and increasing competition in the decentralized application data processing space, the chances of sustainable Ether price growth in the near term remain slim.
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