The price of Ether (ETH) experienced a sharp decline of 21% from April 9 to April 14, reaching its lowest point in 50 days. Despite some recovery, Ether continues to display weakness after failing to break through the $3,200 resistance on April 14. Traders are now questioning whether the $3,000 support level will hold.
Investors are cautiously optimistic about the approval of a spot Ether exchange-traded fund (ETF) in May. However, the conflicting signals from on-chain and derivatives data suggest the possibility of further corrections before the U.S. Securities and Exchange Commission (SEC) makes its decision.
Jan van Eck, CEO of VanEck investment firm, expressed skepticism about the approval of spot Ether ETFs in May. He highlighted the SEC’s prolonged inaction on a list of seven pending applications, including those from major firms like BlackRock, Fidelity, ARK 21Shares, and VanEck.
Eric Balchunas, Senior Bloomberg ETF analyst, noted that the lack of “critical feedback” from the regulator, even in face-to-face meetings, indicates low approval odds, possibly around 35%. James Seyffart, another Bloomberg ETF analyst, added, “There’s no reason for the SEC to have done absolutely nothing for months when we knew this was coming.”
It would be oversimplified to attribute Ether’s recent downturn solely to the dim prospects of spot Ether ETF approval, especially considering that Bitcoin (BTC), the leading cryptocurrency, also experienced a 14% decline in the five days leading up to April 13. A more nuanced analysis would compare Ether’s performance against its direct competitors, particularly those involved with decentralized applications (DApps).
Since April 9, Ether’s decline of 15% was more significant than the 8% drop in BNB (BNB) and the 10% decrease in Tron (TRX). On the other hand, Solana (SOL) experienced a significantly steeper fall. However, these figures do not necessarily reflect the activity levels within each network’s DApps. Therefore, it is important to examine the trends in total value locked (TVL) across these networks.
According to DefiLlama, Ethereum’s network TVL reached its highest level in over 13 months on April 15, totaling 16.4 million ETH, a 14.8% increase compared to the previous month. In comparison, the BNB Chain’s TVL remained stable at 9.5 million BNB, while Tron’s deposits saw a 1% decline in the 30 days leading up to April 15.
To gauge Ether’s prospects, it is crucial to analyze the activity of DApps and ETH derivatives. Not all DApps require substantial deposit bases, so it is important to assess network activity by examining transaction volumes and active user counts.
According to DappRadar, the Ethereum blockchain maintained its dominant position with a 7-day DApp volume of $45.7 billion, significantly outperforming its main rival, the BNB Chain. Furthermore, despite a modest 3% drop in active addresses (UAW) since April 9, which is used as a proxy for user engagement with DApps, Ethereum’s decline was less severe compared to the BNB Chain, which saw a 7% fall.
Analyzing ETH options is crucial to determine whether professional traders have become more pessimistic about Ether’s prospects. A delta skew metric above 7% suggests expectations of a price drop, while a skew below -7% indicates a bullish outlook.
On April 16, Ether’s options skew metric reached its highest level in over two months, entering bearish territory after hovering around the 7% mark for four days. This trend suggests that whales and market makers are demanding a premium for downside price protection on ETH.
While the anticipation of a decision on the spot Ether ETF in May boosts Ether’s price, and the network’s on-chain activity has performed better than its competitors, the growing risk aversion among professional traders on April 16, as indicated by derivatives markets, suggests that further price corrections of ETH below $2,900 should not be overlooked.
It is important to note that this article does not provide investment advice or recommendations. Every investment and trading decision carries risks, and readers should conduct their own research before making a decision.