The Ether (ETH) price fell 18% between July 1 and July 8 to $2,826, but has since recovered somewhat. Investors were understandably disappointed, especially since $313 million in leveraged long positions were liquidated during this period. The current price of $3,100 is still below the previous support level of $3,400, but Ether traders are gradually regaining confidence, as evidenced by on-chain and derivatives indicators.
The supply of Ether on exchanges continues to decline.
Even if it takes longer than expected for a spot Ethereum exchange-traded fund (ETF) to launch in the United States, strong fundamentals suggest that prices could soon rebound. U.S. Securities and Exchange Commission Chairman Gary Gensler recently said he expects approval of the S-1 filing to happen “sometime in the summer,” meaning before the end of September. However, the exact timeline remains unclear, giving traders reason to remain skeptical.
Anticipation for the eventual launch is growing as a similar spot Bitcoin (BTC) ETF has seen inflows of $654 million over the past three days. Matt Hougan, chief investment officer at Bitwise, has suggested that a spot Ethereum ETF could attract up to $15 billion in inflows in its first 18 months of trading. Even if this estimate is 50% off, the analyst believes that Ether’s price will benefit from the supply locked in staking and decentralized applications (DApps).
Onchain analyst Leon Weidman points out that 40% of ETH supply is locked, including staking and DApps, and that supply on exchanges has been declining over the past month. According to Glassnode data, exchange deposits have fallen from 13.34 million ETH two months ago to 12.21 million ETH. In general, the fewer coins there are available for immediate trading, the less likely investors are to sell in the short term.
The total value locked (TVL) on the Ethereum network, which measures the total deposits in the DApp ecosystem including Layer 2 bridges, remains stable at 17.7 million ETH, unchanged from a month ago. This data supports the idea that liquidity on fiat exchanges is decreasing, and shows resilience considering that Ethereum’s average transaction fee exceeds $2, which is significantly higher than many competitors such as Solana (SOL) and BNB Chain (BNB).
Ethereum Layer 2 Activity Increases and Resilient ETH Derivatives Markets
Investors looking to save on fees have benefited from Ethereum’s layer 2 solutions, which have seen a significant increase in activity in the past month.
Over the past 30 days, Ethereum DApps have seen a volume of $200.9 billion, but the Layer 2 ecosystem has expanded significantly. For example, Arbitrum’s volume has surged by 94% to $52.4 billion, Blast’s has grown by 62% to $51.1 billion, and Base’s has grown by 57% to $18.4 billion. In contrast, direct competitors like BNB Chain and Solana have seen an average decline of 27% over the same period.
Even though ETH traded at its lowest level in almost three months on July 8, Ether derivatives were not very enthusiastic in the bear market. Demand for call (buy) options was twice that of put (sell) options, indicating that there was no increase in volume for neutral-bearish strategies using ETH options.
The data showed a slight increase to 0.8 on July 8, meaning that ETH put options volume was 20% lower than call options. However, the indicator quickly reverted to its 7-day average of 0.55, favoring call options volume by 85%. Both derivatives and on-chain indicators support bullish momentum, while the decline in ETH available for trading on fiat exchanges supports the possibility of a short-term price rally above the $3,400 resistance level.
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.