The price of ETH is facing strong resistance at $2,000 and these trading figures explain why.
Ethereum (ETH) market structure remains bearish despite a failed attempt to overcome the down channel resistance at $2,000 on May 31st. This 3-week price action could mean that a possible retest of $1,700 support is underway.
Ether/USD price for 4 hours on Bitstamp. Source: Trading View
As far as non-cryptocurrency is concerned, a number of stock-related factors are causing negative sentiment in the crypto market. This week, Microsoft (MSFT) lowered its earnings and earnings forecasts, citing difficult macroeconomic conditions. The US Federal Reserve has said in its Beige Book periodical that economic activity in parts of the country may have slowed down and that the Fed is looking to cut $9 trillion in its asset portfolio to cope with the ongoing fight against inflation.
On the other hand, a survey of institutional investors published by The Economist found that 85% of respondents agree that open source cryptocurrencies such as Bitcoin (BTC) or Ether (ETH) are useful as portfolio or treasury diversifiers. accounts.
From a macroeconomic point of view, investors are still risk averse, which could lead to a decrease in interest in cryptocurrencies.
Ethereum still has a mountain to climb
The Ethereum Total Network Value Locked (TVL), the total amount of assets placed on the network, has fallen by 5.5% since Ethereum began its downtrend three weeks ago.
The total blocked network of Ethereum, ETH. Source: Defi Lama
The network’s TVL peaked at 28.7 billion Ether on May 10 and is currently at 27.1 million. May. In general, the indicator shows a moderate decline, which was to be expected. after such an unprecedented event.
To understand how professional traders are positioned, let’s look at the Ether futures market data. Quarterly futures are the preferred vehicle of whales and arbitrage bureaus because they do not have a fluctuating funding rate.
These fixed month contracts typically trade at a premium of 5% to 12% over the spot markets, indicating that sellers are asking for more money to hold settlement longer. This situation is also typical for traditional assets such as stocks and commodities.
Ether futures for 3 months on an annualized basis with a premium. Source: Laevitas
Over the past month, the premium on Ether futures contracts has remained close to 3%, below the 5% threshold for neutral markets. The lack of demand for leverage from buyers is clear as the current 2.5% base remains low despite Ether’s three-week negative 24% performance.
Global recession fears continue to weigh on cryptocurrency prices
Ether’s drop to $1,700 on May 27 wiped out any remaining bullish sentiment and, more importantly, led to the liquidation of $235 million of leveraged long futures contracts. Although the price of Ether tested the $2,000 resistance on May 31st, according to the TVL metric, there is no evidence of the strength of DeFi derivatives or deposits.
With investors still focused on traditional markets and the impact of deteriorating global macro conditions, there is little hope for a sustainable decoupling from the higher Ether price.
The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk. When making a decision, you should do your own research.