Important points:
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Ethereum ETF outflows and cautious traders have shown limited confidence that ETH prices will rise for now.
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Low derivatives premiums suggest a dim outlook for Ether prices.
Ethereum (ETH) has fallen 11% over the past week after hitting the $3,400 level on Saturday. The decline occurred along with a 4% correction in the Nasdaq index, erasing gains from the past two weeks. Traders are currently debating whether ETH still has a chance to regain the $3,900 level.
Concerns about global economic growth surfaced after weak quarterly results for consumer-focused companies and renewed concerns about high valuations in the artificial intelligence sector. Meanwhile, the longest US government shutdown in history continues to have a negative impact on the economy.
Ether futures are trading at a 4% premium to the spot market, unchanged from last week. While the data has not yet reached panic levels below 0%, it does indicate limited appetite for bullish positions.
Under normal market conditions, this premium typically falls between 5% and 10%, allowing for longer settlement periods.
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Market anxiety increased after U.S. consumer expectations fell to an all-time low, according to a University of Michigan survey.
The November figures released Friday were the second lowest since at least 1978, largely due to the ongoing U.S. government spending halt, the Associated Press reported.
Part of Ether investors’ frustration stems from Ether’s 4% weaker weekly performance compared to the broader crypto market. This suggests that other factors besides rising macroeconomic risks are likely making traders more cautious about Ethereum.
The total amount locked in the Ethereum network fell to $74 billion, the lowest level since July and a 24% decrease over the past 30 days. Investors were caught off guard after one of Ethereum’s leading decentralized finance (DeFi) platforms, Balancer v2, suffered a $120 million exploit on Monday.
Ethereum DApps revenue declines in October
Ethereum decentralized applications (DApps) had revenue of $80.7 million in October, down 18% from September. This decline is of particular concern to ETH holders as the drop in on-chain activity puts downward pressure on native staking yields.
Ethereum’s design includes a mechanism to burn ETH during periods of high demand for blockchain data processing, helping to balance network activity and supply.
However, the first week of November shows early signs of Ethereum’s strength compared to rival blockchains. Over the past 7 days, active addresses have increased by 5% and transactions have increased by 2%. In contrast, Tron and BNB Chain both saw a decrease in on-chain activity.
A lack of demand for Ethereum spot exchange-traded funds (ETFs) is weighing on ETH trader sentiment. According to Strategic ETH Reserve data, US-listed products recorded net outflows of $507 million during November, with no notable ETH corporate reserve purchases.
Currently, the only clear catalyst for ETH is the upcoming Fusaka upgrade scheduled for early December. This update is designed to provide several scalability and security enhancements to your network.
However, the chances of a breakout towards $3,900 in the near term appear limited as derivatives markets are showing weakness and investors are wary of a slowdown in the global economy.
This article is for general informational purposes only and is not intended to be, and should not be taken as, legal or investment advice. The views, ideas, and opinions expressed herein are those of the author alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.