Over the past week Ethereum has been oscillating in a range between $1,600 and $1,750. However, many indicators seem to indicate that this support remains fragile and may soon give way under selling pressure. A return of $1,200 would then be considered.
Ethereum in sharp recovery
Ethereum has seen better days from a few weeks. Its price is i 60% increase from May 3rd and clearly surpasses its long-time rival Bitcoin. This price increase is partly linked to the arrival of the Blend, which is currently announced on 19 September.
This transitions the Ethereum network from a proof-of-work mechanism to a proof-of-stake mechanism it makes many investors want to. The various tests, on the many testnets of Ethereum, have happened successfully, hope is in order. Many analysts expect the Ether supply drops by almost 90% therefore cause strong buying pressure on the signal !
Another positive indicator for the network, all the assets locked up, the TVL for Total Locked Up Value, took advantage of the collapse of the Terra ecosystem to welcome new funds. Therefore Ethereum consolidates its place asundisputed leader of decentralized finance with almost 59% of total TVL of DeFi, up 51% since May 3 according to the specialized site Defillama.com.
Distribution of TVL by blockchains (source: Defillama.com)
However, it is necessary to remember that the the amount of these assets has melted like snow in the sun since the recent crypto crash. The amount locked on Ethereum smart contracts was 100 billion in December 2021it’s just 40 billion today… Similarly, the average cost of gas fell to $0.90 from $7.50 at the beginning of the month. A sure sign that the network is no longer congested because it attracts fewer users.
Prospective and cautious traders
In order to get a little better feel for the market, it is always interesting to look at the derivatives markets. One of the first indicators we can find is the “skew delta“. When traders expect an increase in the price of the asset, this indicator goes below the -12% mark. Conversely, when it exceeds 12%, this is often a sign of a bearish trend.
Currently, we reached below 12% having exceeded 30% in mid-June. So traders show themselves quite confident to continue the movement of Ether.
Another indicator that may be particularly relevant for observing market sentiment is leveraged markets. This practice allows traders to have more capital thanks to the leverage effect. A riskier practice that should be reserved for professionals in the sector. Bitfinex is a reputable exchange to offer a fairly detailed view of this particular market on large accounts with large jobs built by traders and whalers. We note a peak in long positions, ie purchases, on July 2nd 500,000 ETH is the strongest level since November 2021.
Recently these positions have been reduced at the $1600 support. Traders seem to fear a a potential downside move and therefore their long exposure is limited, for the better protect themselves in case of another fall. If this support were to succeed, Ethereum would certainly revisit the bottom of the previous range, namely the $1,200 area, successfully overcame previous resistance in mid-July. The market as a whole appears to be very difficult to read in that the indicators do not provide precise guidance.
Moreover, the economic context general but also geopolitics still particularly tense and many observers still expect many shocks at the end of the year, both in the crypto market and in the traditional markets. However, as mentioned earlier, the Merge should allow Ethereum to thrive at least for a while. If all goes according to plan for the leader in smart contracts, it will be a strong signal sent to the market which will surely attract many buyers!
To learn more about the Merger and the strategies to adopt for an investor, find our article here.
