Ether price has recorded a 13.5% increase over two days, reaching $3,000 on Thursday. However, traders remain skeptical about maintaining this price level. Despite the recent positive surge, the ETH derivatives market still reflects a lack of confidence, creating doubts among investors regarding sustained growth.
Futures spread and market signals
Currently, the monthly futures price spread of Ether is at 5%, positioned between neutral and bearish territory.
Although this is an improvement from last week's spread of 3.5%, a notable bullish signal finally emerged on January 23, when ETH traded above $3,300. Professional traders are currently less pessimistic but still not fully confident in sustainable bullish potential.
The development of the Layer-2 ecosystem
Ethereum's layer-2 ecosystem is thriving, but low transaction fees are still insufficient to stimulate demand for ETH. Currently, ETH is down 41% from its all-time high in November 2021, which partly explains the market's cautious outlook. Furthermore, Ethereum's network fees have decreased, leading to a lower ETH burn rate. As network activity declines, the circulating supply of ETH increases, exerting bearish pressure.
In the past 30 days, Ethereum network fees have decreased by 22%, down to $34.8 million, according to data from Nansen. This trend has impacted many areas of the blockchain, leaving ETH investors disappointed. The increase in total value locked (TVL) has not translated into higher demand for ETH.
TVL situation and trading volume
The total value locked on the Ethereum network has risen to $73 billion on Thursday, up from $50 billion three months ago. However, trading volume on decentralized exchanges (DEX) has dropped to a nine-month low. Although the previous memecoin frenzy was unsustainable, many ETH investors hope that the increase in activity will last longer.
Ethereum's layer-2 ecosystem has exceeded expectations, generating $58.6 billion in trading volume on DEX in the past 30 days. However, the reduction of roll-up fees through data blobs has yet to create significant growth in demand for ETH.
Compared to Ethereum, Solana has 86% lower total value locked but has generated $25.3 million in network fees. Tron’s transaction fees over the past 30 days are also 60% higher than those of Ethereum.
Options market analysis
To assess whether this lack of confidence is specific to futures contracts, it is necessary to consider the options market. When traders seek bullish opportunities through call options, the delta spread often drops below a neutral range of -5% to +5%. Conversely, the demand for downside protection pushes this index higher.
Currently, the ETH options spread stands at -3%, indicating a balanced interest between bullish and bearish strategies. This has been the case for the past four weeks and reflects a modest improvement compared to last week's reading of +1%.
Cash flow and the future of institutional demand
Recent ETH price increases have primarily been driven by a net inflow of $468 million into U.S.-listed ETF funds over the past four days. Other supportive factors include the purchase of ETH by ShapLink Gaming (SBET) and Bit Digital (BTBT) as part of their treasury strategy.
However, it remains unclear whether institutional demand will continue to be sustained. Currently, ETH derivative products reflect limited conviction in a sustainable bullish trend.