Ethereum’s Struggle to Regain Momentum

ETH Price Remains Stuck Below $2,000

Ethereum (ETH) price has risen 6.4% from its March 30 low of $1,768, but the altcoin has struggled to regain the $2,000 level. Some traders believe that the downturn is partially connected to the deflating memecoin market, which has significantly reduced activity across the decentralized applications (DApps) ecosystem and broader crypto space.

Ether is currently 44% down year-to-date, and derivatives metrics indicate that traders are far from bullish and show little confidence in a strong recovery in the near term. Proof of this can be found in the premium on Ether futures relative to spot markets.

While the figure rose to 4% on April 2, up from 2% on March 31, it is still below the neutral 5% threshold. This data indicates that Ether investors remain far from turning bullish, despite the strengthening support at the $1,800 price level.

Whales and Market Makers Lack Confidence

To assess whether whales and market makers lack confidence in Ether’s performance, one should analyze the ETH options market. Under neutral conditions, the 25% delta skew should be balanced between call (buy) and put (sell) options, typically ranging from -6% to 6%.

The Ether delta skew metric has retreated from the 9% level seen on March 31, yet the current 7% reading suggests that risk-aversion sentiment remains strong. The rising cost of hedging indicates that whales fear further downside for ETH, suggesting it may take longer for traders to regain confidence.

Ethereum Adoption Remains Strong Despite DApps Revenue Drop

It’s easy to attribute much of Ether’s price decline to the 49% drop in Ethereum DApps revenue between January and March. However, while the reduced network activity limits the influx of new users and dampens overall demand for ETH, its advantages over traditional financial markets and its dominance in decentralized finance (DeFi) remain unchanged.

The stablecoin holdings on Ethereum are nearing an all-time high of $124.5 billion, and Ethereum is still the undisputed leader, with $49 billion in total value locked (TVL). This data suggests significant potential for ETH adoption, particularly as new use cases emerge, such as structured products and more complex DeFi applications leveraging synthetic assets.

Despite the early struggles of metaverse applications, declining interest in memecoins, and the sharp downturn in non-fungible token (NFT) marketplace activity, the Ethereum network continues to expand.

ETH Funding Rate Neutral as ETFs Dampen Retail Trading Enthusiasm

Instead of focusing solely on how professional traders are positioned, it is also valuable to assess retail investors’ sentiment. Perpetual futures (inverse swaps) typically follow spot prices closely, as leverage imbalances are corrected through a fee known as the funding rate, which is charged every eight hours. In neutral markets, this rate fluctuates between 0.1% and 0.3% over a seven-day period.

The ETH perpetual funding rate has been neutral since March 31, indicating that retail traders are not attempting to catch a falling knife. A key factor behind this lack of enthusiasm is the spot Ether exchange-traded funds (ETFs), which saw $37 million in net outflows over the past two weeks.

Conclusion

Ethereum’s price struggle to regain the $2,000 level is a result of a combination of factors, including the deflating memecoin market, reduced activity across the DApps ecosystem, and a lack of confidence among whales and market makers. While Ethereum adoption remains strong, the current market sentiment is risk-averse, and it may take longer for traders to regain confidence in ETH’s price outlook.

FAQs

Q: What is the current state of the Ethereum market?

A: The Ethereum market is currently experiencing a lack of confidence among traders, with the price stuck below $2,000 and derivatives metrics indicating a risk-averse sentiment.

Q: Why is the Ethereum price struggling to regain the $2,000 level?

A: The Ethereum price is struggling to regain the $2,000 level due to a combination of factors, including the deflating memecoin market, reduced activity across the DApps ecosystem, and a lack of confidence among whales and market makers.

Q: What is the current state of Ethereum adoption?

A: Ethereum adoption remains strong, with the stablecoin holdings on Ethereum nearing an all-time high and Ethereum still the undisputed leader in decentralized finance (DeFi).

Q: What is the funding rate, and why is it important?

A: The funding rate is a fee charged every eight hours to correct leverage imbalances in perpetual futures markets. It is important because it indicates the sentiment of retail traders, with a neutral rate suggesting a lack of enthusiasm for the market.