The price of Ether is currently holding around the $2,000 mark, but recent developments, including a significant $242 million outflow from US-listed Ether exchange-traded funds (ETFs), raise concerns about potential further declines. Investor sentiment has weakened as institutional demand for ETH appears to be cooling, with many shifting their focus to the relative safety of short-term US government bonds.
Since February 5, Ether has struggled to maintain levels above $2,150, leading traders to speculate about a possible price correction. The latest downturn follows a brief recovery, where ETH rebounded by 20% after hitting a low of $1,744 on February 6. However, signs of inconsistent economic growth in the US have prompted increased demand for government bonds, reflecting a cautious market outlook.
As yields on the US 2-year Treasury dipped to 3.42%, nearing their lowest since August 2022, expectations of future interest rate cuts by the Federal Reserve have grown. This shift indicates traders” concerns regarding economic stagnation and its implications for inflation, which in turn affects risk sentiment in the cryptocurrency market.
Despite macroeconomic pressures, Ether has notably underperformed compared to the broader cryptocurrency sector, prompting questions about its competitiveness against other networks that offer enhanced scalability and speed. Over the past 30 days, ETH“s value has plummeted by 38%, which may further impact network fees and reduce incentives for staking. Currently, the staking yield stands at 2.9%, considerably less attractive given the US Fed target rate of 3.5% and an annualized supply growth rate of 0.8% for ETH.
Professional traders are increasingly wary of downside exposure, as indicated by the ETH options delta skew at Deribit, which registered at 10% on Friday. This figure suggests a premium for put options, reflecting a growing preference for neutral-to-bearish strategies. With ETH trading 58% below its all-time high, the mood among traders aligns with a prolonged bear market.
However, it is crucial to note that the $242 million in ETF outflows constitutes less than 2% of the total $12.7 billion in assets under management. Thus, it would be premature to conclude that ETH is on a downward spiral. The network continues to lead in Total Value Locked, and as market conditions evolve, investor confidence may rebound.
In the meantime, the focus will likely remain on upcoming corporate earnings and the US government”s ability to manage its debt amid global socio-economic challenges. Under these circumstances, Ether“s price could continue to face pressure, regardless of on-chain metrics or derivatives data.
This article does not offer investment advice. All trading involves risks, and readers are encouraged to conduct their own research before making decisions. Cointelegraph strives for accuracy but does not guarantee the completeness or reliability of the information presented.
