Despite the failure to break the descending channel resistance of $2,000 on May 31, Ether’s (ETH), market structure remains bearish. The three-week-long price structure could indicate that an eventual retest at $1,700 support may be in the works.
Bitstamp: 4-hour Ether/USD price Source: TradingView
Non-crypto, negative sentiment is being generated by a variety of equities-related issues. Microsoft (MSFT), citing difficult macroeconomic conditions, has lowered its profit outlook and revenue outlook this week. In its “Beige Book”, the U.S. Federal Reserve indicated that some areas of the country may have experienced a cooling in economic activity. The Fed will soon reduce its $9 trillion asset pool to combat persistent inflation.
A positive side effect of this survey was that 85% of institutional investors agreed that open-source cryptocurrency like Bitcoin (BTC), Ether, are valuable as diversifiers in a portfolio.
Macroeconomically, investors remain cautious, which could lead to a decreased appetite for cryptocurrency.
Ethereum has yet to conquer the mountain.
Since Ether’s downtrend began three weeks ago, the Ethereum network’s total valued locked (TVL) has fallen by 5.5%. This is the total amount assets that have been deposited to the network.
Total value of Ethereum network, ETH. Source: Defi Llama
TVL for the network peaked at 28.7 Billion Ether on May 10, and is currently at 27.1 M. Deposits in Decentralized Finance (DeFi), were severely affected by the USD Terra stablecoin crash on May 10. The indicator shows a slight decrease, but this is to be expected following such an extraordinary event.
Let’s take a look at Ether’s futures markets data to see how professional traders are placed. Because they don’t have a fluctuating funding rate, quarterly futures are preferred instruments by whales and arbitrage desks.
Fixed-month contracts are typically traded at a 5%-12% premium to spot market prices. This indicates that sellers demand more money to hold settlement for longer periods of time. This is also true for traditional assets like stocks and commodities.
Futures Ether: 3-month annualized premium Source: Laevitas
Ether’s futures contract premium has remained at 3% over the past month. This is well below the neutral-market threshold of 5%. Despite Ether’s 24% negative performance over the past three weeks, the 2.5% basis indicator is still depressed.
Crypto prices continue to be affected by fears of a global recession
Ether’s May 27 crash to $1700 drained any remaining bullish sentiment, and more importantly, resulted in $235 million worth of leverage long futures contract liquidations. According to the TVL metric, Ether price did not test the $2,000 resistance on may 31. There is no evidence that Ether has strength from DeFi deposits or derivatives.
Investors’ attention is still on the traditional markets and the effects of global macroeconomic worsening, so there is no hope for an Ether price decoupling to the upside.
Risk is inherent in every investment or trading move. Before making any investment or trading move, you should do your research.