Ether (ETH) experienced a significant decline of 21% from April 9 to April 14, reaching a 50-day low. Despite some recovery, Ether continues to display signs of weakness after failing to break the $3,200 resistance on April 14. Traders are now uncertain whether the $3,000 support level will hold.
The approval of a spot Ether exchange-traded fund (ETF) in May is a topic of cautious optimism among investors. However, the conflicting signals from on-chain and derivatives data suggest the possibility of further corrections before the U.S. Securities and Exchange Commission (SEC) reaches a decision.
Jan van Eck, the CEO of VanEck investment firm, expressed doubt about the approval of spot Ether ETFs in May. He pointed to the SEC’s lack of action on a list of seven pending applications, including those from major firms like BlackRock, Fidelity, ARK 21Shares, and VanEck.
Eric Balchunas, a Senior Bloomberg ETF analyst, noted that the absence of “critical feedback” from the regulator, even in face-to-face meetings, indicates low approval odds, possibly around 35%. James Seyffart, another Bloomberg ETF analyst, added, “There’s no reason for the SEC to have done absolutely nothing for months when we knew this was coming.”
It would be oversimplistic to attribute Ether’s recent decline solely to the dim prospects of spot Ether ETF approval, especially considering that Bitcoin (BTC), the leading cryptocurrency, also fell 14% in the five days leading up to April 13. A more nuanced analysis would compare Ether’s performance against its direct competitors, particularly those involved with decentralized applications (DApps).
Since April 9, Ether’s decline of 15% was more significant than the 8% drop in BNB (BNB) and the 10% decrease in Tron (TRX). On the other hand, Solana (SOL) experienced a notably steeper fall. However, these figures do not necessarily reflect the activity levels within each network’s DApps. Therefore, it is crucial to examine the trends in total value locked (TVL) across these networks.
According to DefiLlama, Ethereum’s network TVL reached its highest level in over 13 months on April 15, totaling 16.4 million ETH, which is a 14.8% increase compared to the previous month. In comparison, the BNB Chain’s TVL remained stable at 9.5 million BNB, while Tron saw a 1% decline in deposits over the 30 days leading up to April 15.
To assess the price prospects of Ether, it is essential to analyze DApps activity and ETH derivatives. Not all DApps require substantial deposit bases, so it is crucial to evaluate network activity by examining transaction volumes and active user counts.
According to DappRadar, the Ethereum blockchain maintained its dominant position with a 7-day DApp volume of $45.7 billion, significantly outperforming its main rival, the BNB Chain. Furthermore, despite a modest 3% drop in active addresses (UAW) since April 9, which serves as a proxy for user engagement with DApps, Ethereum’s decline was less severe compared to the BNB Chain, which saw a 7% fall.
Analyzing ETH options is crucial to gauge whether professional traders have become more pessimistic about Ether’s prospects. A delta skew metric above 7% indicates expectations of a price drop, while a skew below -7% indicates a bullish outlook.
On April 16, Ether’s options skew metric reached its highest level in over two months, entering bearish territory after hovering around the 7% mark for four days. This trend suggests that whales and market makers are demanding a premium for downside price protection on ETH.
While the anticipation of a decision on the spot Ether ETF in May supports Ether’s price, and the network’s on-chain activity has performed better than its competitors, the growing risk aversion among professional traders on April 16, as indicated by derivatives markets, cautions against overlooking the potential for further price corrections of ETH below $2,900.
This article is not providing investment advice or recommendations. Every investment and trading decision carries risks, and readers should conduct their own research before making any decisions.