Saturday, September 23, 2023

Ethereum’s Stability May Trap Bulls


When reviewing the price trend of Ether (ETH), one could argue that the three-month-long negative trajectory has come to an end. The outcomes are because of several reasons. The current price range of $3,100 reflects a 43 percent rebound in 15 days. Also, more crucially, Ethereum broke the falling pattern resistance on Feb. 7.

Should Ether bulls begin to rejoice and demand $4,000 and higher? This is mainly determined by how retail traders are positioned and the on-chain measurements of the Ethereum network. Is the $30-plus transaction cost, for example, affecting the employment of decentralized applications (dApps)? Or are there any other issues impeding Ether’s price growth?

Bitcoin Account

Bitcoin (BTC) is yet to breach the $45,500 resistance following the 55.6 percent correction from the all-time high of $4,870. For the cycle bottom of $2,160 on Jan. 24. Thus, traders determined that a 12 percent correction was the most probable outcome.

On a more positive note, Big Four auditor KPMG’s Canadian wing revealed the incorporation of Bitcoin and Ether. When it comes to its institutional treasury on February 7. Benjie Thomas is the managing partner at KPMG Canada. He stated that the move underscores the firm’s assessment that cryptocurrencies are a growing. Also, it is a developing asset class.

Ethereum’s Derivatives Data

To determine how optimistic investors are about Ether’s price comeback, look at the permanent contracts’ futures records. This item is the ideal option for retail traders since its price matches the regular spot markets.

Longs (buyers) and shorts (sellers) are always paired in any futures contract trade, although their usage of leverage differs. As a result, exchanges will levy a funding rate to whichever party requires more leverage. Furthermore, the other party will receive this price.

This sign will inform us if retail traders are growing enthused. It would cause it to rise above 0.05 percent, or one percent every week. Note how the financing rate has been somewhat negative in recent months, demonstrating the bearish attitude. Presently, there is no indication that retail traders are optimistic enough to restart leveraged long bets.

To determine whether the lack of confidence in particular to leverage trading, one should examine the Ethereum network’s on-chain statistics. There is no fixed relationship between Ether’s value and network activity. Because of that, a low volume of transactions and reduced active members could be a problem if wholly disconnected from a price increase.

On-chain Metrics Concern

The economic value of ETH exchanged on the network gives a solid metric of effective use. Of course, increased acceptance of layer-2 solutions could mask this metric; however, it remains a starting point.

The present daily transaction average of $6.2 billion is a 55 percent decrease from the top in December. Moreover, it is not far from the one-year low of $5.6 billion. Therefore, it is reasonable to assume that Ether token utilization is not exhibiting signs of progress. Or at least on the primary layer.

Analysts should also look at metrics for decentralized application utilization. It is important to recall that Total Value Locked (TVL) is primarily concentrated on loan platforms and decentralized exchanges (DEX). As a result, calculating the number of active domains provides a more comprehensive picture.

Christina Jones
Christina Jones
Christina Jones is the owner and CEO of Cryptoconstellation Before starting Crytpoconstellation, Christina spent ten years as an Editor in Chief at a well-known publishing house, Editorial Planeta SL, in Madrid.

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