Ether (ETH) price has struggled to hold the $1,850 support since April 21, the same level it held before the rally towards $2,100 started on April 13. Investors have reason to wonder if there are buyers, given the 13.5% six-day price correction and $548 million in leveraged long positions in futures settled between April 19-21.
First, the regulatory environment appears to have become more stringent for centralized exchanges. Dubai-based Bybit, for example, announced that all users must complete KYC identity verification for order execution and withdrawals. Prior to the May 8 update, users who did not know their identity had a monthly withdrawal limit of $100,000 in Tether (USDT).
Cryptocurrency exchange Gemini announced the upcoming launch of a derivatives platform outside the US on April 21. The uncertain regulatory environment forced the company to seek alternative regions, though only clients in certain regions will be able to access the new service. . The list excludes the US, Canada and most European countries except Switzerland.
Given its lower use in decentralized applications (Dapps), the Ethereum network is probably experiencing its own problems. For starters, total Ethereum smart contract deposits in ETH terms plummeted to their lowest levels since August 2020. Such an analysis already excludes the effects of Ethereum’s native staking, which recently began allowing withdrawals.
According to data from DefiLlama, Ethereum Dapps reached 15.3 million ETH in total value locked (TVL) on April 24. This figure contrasts with the 22.0 million ETH of six months earlier, which represents a decrease of 30%. For comparison, TVL on BNB Smart Chain in BNB terms was down 20%, and Polygon network MATIC deposits were down 11%.
Furthermore, the Ethereum network’s dominance in stablecoin deposits reached its lowest level in over 12 months at 54%, down from 64% in December 2022. On the other hand, the Tron network was the biggest gainer in stablecoins due to their low transaction fee. For comparison, the average transaction fee on the Ethereum network has been above $4 since February 2023.
Ethereum’s market share by volume on decentralized exchanges (DEXs) peaked at 75% in the week ending March 5, but has steadily fallen to 44% in the week ending April 16.
The biggest gainers in DEX trading volume have been Arbitrum, which has risen from 7% to 22.2%, and BNB Smart Chain, which has risen from 5.1% to 16.6% since March 5. It could be argued that the success of the Ethereum network scaling solution necessarily reflects an upward trend in the Ether price, but that relationship is not so direct.
Professional traders are leaning lower
To find out if professional traders are valuing more the probabilities of a fall in the price of ETH, it is necessary to analyze the options markets. Traders can gauge market sentiment by measuring whether there is more activity through call or put options. Generally, call options are used for bullish strategies while put options are used for bearish ones.
A ratio of 0.70 between indicates that open interest for put options lags that of more bullish call options and is therefore a positive indicator. On the contrary, an indicator of 1.40 favors put options, which can be considered negative.
Ether’s put and call ratio volume fell to its lowest level in more than three months, indicating excess demand for neutral to bearish put options. Currently, protective put options outnumber neutral to bearish call options by more than four times.
Judging by the uncertain regulatory environment in the US and the fallout from competing networks, whether or not they use Layer 2 technologies, it is unlikely that the price of Ether will be able to hold the $1,850 support. Derivatives traders clearly reflect the higher probability of negative price movements.
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