Key takeaways:
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Trader caution persists in ETH derivatives despite recent price gains and strong ETF inflows.
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Ethereum experiences growing competition from Solana and BNB Chain amidst stagnant network activity.
Ether (ETH) has surged over 56.5% in the last 30 days, yet metrics from derivatives markets show traders are not fully confident. This hesitance is largely due to Ethereum’s repeated inability to surpass the $4,000 threshold since March 2024, compounded by ongoing weakness in on-chain activity.
The annualized funding rate for ETH perpetual futures dropped to 9% recently, signaling decreased demand for leveraged bullish positions. This contrasts with a 19% funding rate observed early in the week and surprisingly matches levels seen when ETH was trading near $2,600 in early July, despite a 46% price increase since then.
Declining Ethereum Deposits Cause Disappointment
Trader skepticism is further fueled by an 11% decline in network deposits. Total Value Locked (TVL) on Ethereum fell to a five-month low of 23.4 million ETH, down from 26.4 million a month ago. In contrast, Solana’s TVL decreased just 4% in SOL terms, while BNB Chain’s deposits increased by 15% in BNB terms.
Ethereum has also been overtaken in decentralized exchange (DEX) volume by competitors. Over a 30-day period, Ethereum recorded $81.4 billion in DEX activity, while Solana reported $82.9 billion and BNB Chain led with $189.2 billion, according to DefiLlama.
Sustained network activity is vital, as transaction fees provide incentives for validators and encourage development of decentralized applications (DApps). Even with Ethereum’s leadership in TVL and developer activity, stagnant network usage compared to rivals may erode these advantages.
Examining ETH monthly futures markets reveals a neutral annualized premium of about 6%, down from 8% earlier in the week. This suggests a cautious stance from whales and market makers. Notably, this dip coincided with nearly three weeks of steady net inflows into spot Ether ETFs.
Concerns linger about Ethereum’s competitive edge as Solana and BNB Chain offer higher user capacities at the base layer, potentially enabling superior user experiences. Additionally, significant corporate holdings of Ether, which have driven recent price gains, raise questions about future price momentum.
Nine publicly traded firms hold over 2,000 ETH each, including Bitmine Immersion Tech (BMNR), SharpLink Gaming (SBET), and The Ether Machine (DYNX). Should corporate buying continue, ETH could target $5,000; however, market participants remain skeptical that the $4,000 level is within immediate reach.
This article provides general information only and is not investment advice. Opinions expressed are the author’s and do not represent Coinstelegram’s views.
