The Ether (ETH) price rose 12.5% between July 12 and July 15, but the strong resistance at $3,500 halted the bullish momentum. The correction after the drop to $3,400 on July 18 occurred despite the approval of two additional spot Ethereum exchange-traded funds (ETFs) by the U.S. Securities and Exchange Commission (SEC). Despite these positive developments, Ether’s derivatives market has shown little excitement.
Analysts predict that ETH will hit $5,000, but is this realistic?
The SEC has reportedly given preliminary approval to at least three issuers to begin trading spot Ether ETFs on July 23. A total of eight spot Ether ETFs are awaiting final regulatory approval following amendments to the funds’ S-1 filings. Matt Hougan, Bitwise’s chief investment officer, expects Ether to hit $5,000 by the end of 2024, citing a low equivalent inflation rate, no significant costs to validators, and a 28% supply locked in staking.
Given that the total cryptocurrency market cap has increased by 43% since the beginning of the year, it is puzzling why Ether investors are not bullish despite the spot ETH ETF momentum. Furthermore, according to DappRadar data, Ethereum decentralized application (DApp) transaction volume has increased by 7% over the past 30 days, reaching $221 billion. In comparison, its competitor BNB Chain has seen a 25% decrease in activity, and Solana has seen a 16% decrease in transaction volume.
According to DefiLlama data, the Ethereum network remains in the lead in terms of DApp deposits, with a total locked value (TVL) of 17.5 million ETH, or $59.8 billion. This metric has remained flat from the previous month, while its competitors Solana and BNB Chain each have around $4.8 billion. In addition, according to L2Beat data, activity in Ethereum’s Layer 2 ecosystem has increased, with the total primary TVL increasing by 8.5% over the past 30 days, reaching $14 billion. Therefore, Ethereum on-chain data shows no signs of weakness.
From a macroeconomic perspective, the recent US producer price index rose 2.6% year-on-year, slightly higher than the market consensus of 2.3%. This indicates that the US Federal Reserve (Fed) still has work to do to curb inflation, meaning that price pressures will continue to negatively impact demand for the time being. In addition, China’s disappointing annual GDP growth of 4.7% could cause problems for global stock markets.
The Labor Department also reported that 243,000 new unemployment claims were filed in the week ending July 13, the highest level since August 2023. Signs of a cooling labor market are increasing the likelihood that the Federal Reserve will cut interest rates in the coming months, according to Goldman Sachs chief economist Jan Hatzius, Yahoo Finance reported.
There are no signs that investors are fleeing riskier markets, as evident by the S&P 500 index being just 2% below its all-time high set on July 16. Meanwhile, Ether’s price would have to rise 43% to surpass the $4,868 mark set in November 2021.
Ether futures do not anticipate an imminent price surge.
To assess whether crypto traders are gaining confidence, we need to analyze the Ether futures premium. In a normal market, these contracts should trade 5% to 10% higher than the typical spot market, taking into account the long settlement period.
Related: Bitcoin ETFs Have 4-8x More BTC Price Influence Than Miners – Study
The annual premium or benchmark rate for Ether fixed-month contracts is currently at 11%, indicating moderate optimism. However, this indicator has not been able to maintain levels above 12% over the past month, which is somewhat concerning given the potential inflows from the upcoming spot ETF in the US. For comparison, Bitcoin’s benchmark rate is also at 11%, indicating that there is no excessive bullishness among Ethereum investors.
Ether bulls could argue that the current lack of confidence leaves room for a surprise if expectations of strong spot ETF net inflows are confirmed. Nevertheless, given that ETH price has failed to rally despite a bullish scenario for risk assets, ETH derivatives indicators point to a lack of investor appetite, making a bull run above $4,000 less likely.
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.