Key Takeaways:
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The ETH futures premium and put options bias suggest traders are aggressively hedging despite an 8% price rally.
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Ethereum weekly fees fell 49% as a result of weaker DEX activity, while Tron and Solana fees rose 9%.
Ether (ETH) gained 8% on Tuesday but stalled near $3,000 as derivatives markets signaled doubts about further upside. The move followed the broader cryptocurrency rally as traders priced in higher possibilities of fresh economic stimulus, particularly after tension within the Japanese government bond market on Monday.
ETH/USD (left) vs. total crypto cap/USD (right). Source: TradingView / Cointelegraph
Sentiment improved as investors became more confident that US monetary policy would turn into less restrictive. The Federal Reserve (Fed) ended its balance sheet reduction program on December 1st and traders expect a rate cut on December tenth. More importantly, major financial institutions within the United States have greatly expanded the usage of repurchase agreements, providing liquidity in short-term funding markets.
The tech-heavy Nasdaq index has recouped much of its November losses and is now trading nearly 3% below its all-time high. Still, positioning in ETH derivatives stays tight, suggesting that bullish traders have limited conviction.
On Tuesday, the annual ETH monthly futures premium over spot markets remained at 3%, unchanged from the previous week. Values below 5% indicate very weak demand for leveraged long exposure, an comprehensible result given Ether's 22% decline within the last 30 days.
Ether lags stocks as global politics turns expansionary
Ether's underperformance in comparison with the US stock market is a cause for concern, especially as central banks signal more expansionary economic measures.
The Fed injected $13.5 billion in overnight funding on Dec. 1, the second-highest level in greater than five years. Designed as a liquidity backstop, this facility held over $2.5 trillion in money reserves in 2022 as a result of stimulus measures and ultra-low rates of interest. However, these balances were later withdrawn as participants sought higher returns elsewhere.
Other aspects could weigh on crypto demand, including fears of overinvestment in artificial intelligence infrastructure and renewed regulatory pressure on stablecoins. China's central bank also vowed to step up its crackdown on money laundering activities and unauthorized cross-border transfers of digital assets.
Professional Ether traders remain concerned about downside risks, a view reflected in the continued strain in options markets.
ETH put (sell) options are trading at a 6% premium to comparable call (buy) contracts, a pattern often related to bearish conditions. For reference, the skew metric was at a neutral 4% on Friday. This shift suggests that something remains to be dampening traders' optimism, whilst the rally in U.S. stocks suggests increasing risk appetite in traditional markets.
Fees on the Ethereum network fell to their lowest level in greater than three years, falling to $2.6 million in seven days, in comparison with $5.1 million 4 weeks ago. Part of this decline reflects a decline in activity on decentralized exchanges, where volume fell to $13.4 billion over the identical period after reaching a peak of $36.2 billion in August.
Even more worrying, rival chains Tron and Solana saw a 9% increase in 7-day fees, in line with Nansen data. A dormant Ether whale move on Sunday added to investor fears. An organization energetic since Ethereum's genesis block in 2015 transferred 40,000 ETH to a brand new address, sparking speculation a couple of possible sale.
Ethereum's Fusaka upgrade, scheduled for Wednesday, is a very important step toward higher scalability and an improved wallet management experience. Nevertheless, demand for decentralized applications has weakened, leading to lower fees. There is currently limited evidence that ETH is able to outperforming the broader cryptocurrency market.
This article is for general information purposes and shouldn’t be intended to constitute, and shouldn’t be construed as, legal or investment advice. The views, thoughts and opinions expressed herein are those of the writer alone and don’t necessarily reflect the views and opinions of Cointelegraph.
