Ether (ETH) price experienced a significant setback after encountering strong resistance at the $4,100 level on March 12. Over the past week, Ether has seen a 9% decline, performing worse than the overall cryptocurrency market. This has led traders to speculate whether the current support level of $3,200 will hold. For reference, the total cryptocurrency market capitalization fell by 2.5% during the same period.
Ether’s bullish prospects depend on the potential approval of a spot Ethereum exchange-traded fund (ETF). The United States Securities and Exchange Commission (SEC) is currently reviewing the matter, and a final decision is expected by May 23. However, Bloomberg senior ETF analyst James Seyffart does not see approval as the most likely outcome.
It’s important not to overlook the recent upgrades to the Ethereum protocol. The Dencun hard fork, which occurred on March 13, aimed to improve the network’s scalability and layer-2 data processing capabilities, making it more appealing to rollup solutions. As a result, transaction fees for most applications on Arbitrum, Optimism, and Base have significantly decreased.
According to Cointelegraph, Dencun’s enhancements are expected to encourage Ethereum users to adopt layer-2 solutions. Data shows a surge in 7-day volumes for Arbitrum, Optimism, and Base by 145%, 144%, and 203%, respectively. This has alleviated some of the downward pressure on Ether’s price caused by high gas fees.
While competitors like BNB Chain (BNB) and Solana (SOL) offer lower transaction fees at the base layer, which may seem more accessible to newcomers, Ethereum’s ecosystem has still seen positive impacts. However, Solana’s decentralized application (DApps) volumes have increased by 57% in the past week, according to DappRadar.
The bearish outlook for Ether’s mid-term price is supported by the increasingly complex regulatory environment in the United States. The SEC is investigating companies for potential connections with the Ethereum Foundation in an effort to classify Ether as a security.
Market experts, including Van Buren Capital and lawyer Scott Johnsson, believe that the SEC’s probe into Ether’s security status serves as “an additional pretext to deny” spot Ether ETF applications. However, Coinbase’s chief legal officer, Paul Grewal, argues that the SEC has no valid reason to reject Ether ETF applications.
To gauge whether professional traders have turned bearish after Ether’s price decline, one can look at the ETH options 25% delta skew. A skew metric above 7% indicates expectations of a price drop, while a negative 7% skew typically reflects bullish sentiment.
From March 21 to the present, the ETH options 25% skew has risen from 0% to 5%, suggesting cautious skepticism towards the $3,200 support level. However, despite an 11% correction in Ether’s price over the week, the skew metric remains in neutral territory, indicating that bearish sentiment has not intensified significantly.
Taking a broader perspective, the Ethereum network maintains its leading position in terms of deposits, with a total value locked (TVL) of $94 billion. The decision by BlackRock, the world’s largest asset manager, to launch a tokenized asset fund on Ethereum further solidifies the network’s prominence. Therefore, there is currently no compelling reason to doubt that Ether’s support at $3,200 will be broken in the near future.
This article is for informational purposes only and does not constitute investment advice or recommendations. Readers should conduct their own research before making any investment or trading decisions.