Ethereum (ETH) stunned the market with a 29% price surge between May 8 and May 9, marking a potential end to a 10-week bearish trend that had seen the price drop to a yearly low of $1,385 on April 9. The sudden upswing triggered the liquidation of over $400 million in short ETH futures, highlighting a market caught off guard by the bullish momentum. Despite the sharp rally, derivatives data suggests trader confidence remains cautious. The ETH futures premium has yet to cross the 5% threshold typical of a bullish market, indicating weak demand for leveraged long positions. While some analysts see this as room for further short covering, others are wary due to a lack of significant fundamental improvements in Ethereum’s ecosystem.

Ethereum Fundamentals: A Mixed Bag

On-chain metrics show that Ethereum still leads in decentralization and Total Value Locked (TVL), boasting $64 billion in locked assets across protocols. In contrast, the combined TVL of competitors Solana, BNB Chain, and Tron sits at just $22.3 billion.

Recent network upgrades have improved Ethereum’s Layer-2 scalability, solidifying its position in terms of security and decentralization. However, these technical milestones have yet to translate into stronger ETF inflows or derivatives market enthusiasm.

ETF Outflows Cloud the Rally

In a surprising twist, Ethereum’s strongest single-day performance in four years was not enough to stem capital flight. US-listed Ether spot ETFs posted $16 million in net outflows on May 8, marking the third consecutive day of withdrawals, according to Farside Investors.

This lack of institutional inflows, even during a rally, raises doubts about broader investor conviction. Some analysts blame the 85% drop in Ethereum network fees from January to April, which has reduced demand for ETH and lowered staking yields. The decline in fees also impacts Ethereum’s burn mechanism, further undermining the bullish case.

Options Market Signals Neutral Sentiment

ETH options pricing currently shows put and call options trading at similar premiums, signaling a neutral sentiment among whales and market makers. This is generally not a bullish sign and suggests market participants are preparing for potential volatility in either direction.

However, political developments in the U.S. may add an unexpected twist to Ethereum’s trajectory. A May 8 Politico report revealed that former President Donald Trump distanced himself from previous crypto lobbying efforts, including endorsements of Solana, Cardano, and XRP. His reversal could open up room for Ethereum to regain policy favorability and narrative dominance.

Price Outlook: Can ETH Reach $2,700?

Given the broader market context and ongoing ETF outflows, Ethereum’s recent rally may face resistance at the $2,700 mark. Yet, if investor sentiment improves—especially in reaction to faltering lobbying efforts by rival blockchains—a breakout remains on the table.

For now, Ethereum's resurgence highlights its resilience in the face of skepticism, but its path forward will likely depend on renewed institutional interest, macro developments, and sustained on-chain activity.

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