Weak Inventory and Decline in DeFi Usage Continue to Weigh Ethereum Price

The 12-hour closing price of Ether (ETH) has been hovering in a narrow range of $1,910-$2,150 for the past twelve days, but curiously, these 13% swings were enough to liquidate a total of $495 million worth of contracts. futures since May 13 according to data from Coinglass.

Ether/USD 12-hour price at Kraken. Source: Trading View

Deteriorating market conditions were also reflected in digital asset investment products. According to the latest edition of CoinShare’s weekly digital asset fund flow report, crypto funds and investment products saw an outflow of $141 million in the week ending May 20. net redemption.

Russian regulation and the collapse of US tech stocks are making things worse

Regulatory uncertainty weighed on investor sentiment after an updated version of the proposed Russian mining law was released on May 20. The document filed in the lower house of the Russian parliament no longer contained the registration requirement for crypto mining operators nor the one-year tax amnesty. . As quoted by local media, the state’s legal department said the measures could “eventually incur costs on the federal budget.”

Additional pressure on Ether price came from the 2.5% drop in the Nasdaq Composite Index on May 24. and labor disruptions. As a result, Meta Platforms (FB) shares fell 10%.

On-chain data and derivatives are in favor of the bears

The number of active addresses on decentralized applications (DApps) on the largest Ethereum network fell 27% from the previous week.

The most active DApps on the Ethereum network in USD. Source: DappRadar

The most active decentralized applications on the network have seen a substantial reduction in the number of users. For example, Uniswap V3 weekly addresses decreased by 24%, while Curve faced 52% fewer users.

To understand how professional traders, whales, and market makers are positioned, let’s look at Ether futures market data.

Quarterly futures contracts are used by whales and arbitration offices primarily due to their lack of fluctuating funding rates. These fixed-month contracts typically trade at a slight premium to spot markets, indicating that sellers are asking for more money to delay settlement longer.

These futures should trade at a 5-12% annualized premium in healthy markets. This situation is technically defined as “contango” and is not exclusive to crypto markets.

Ether Futures 3-month annualized premium. Source: Laevitas

Related: Bitcoin Price Recovers To Weekly Lows Below $29,000 As Nasdaq Leads Further Fall In US Stocks

The Ether futures premium fell below the 5% market neutral threshold on April 6. There is a clear lack of conviction from leveraged buyers as the current 3% basis indicator remains depressed.

Ether may have gained 2% after testing the resistance of the $1,910 channel on May 24, but on-chain data shows a lack of user growth, while derivatives data points to bearish sentiment.

Until there is an improvement in morale that boosts the use of decentralized applications and the Ether futures premium returns to the neutral 5% level, the chances of the price breaking above the $2,150 resistance appear low. .

The views and opinions expressed herein are solely those of the author and do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk. You should conduct your own research before making a decision.

Garland K. Long