Ether (ETH) price experienced a significant setback on March 12 when it encountered strong resistance at the $4,100 level. Over the past week, Ether has seen a 9% decline, which is underperforming compared to the broader cryptocurrency market. Traders are now speculating whether the current support level of $3,200 will hold. It’s worth noting that the total cryptocurrency market capitalization also fell by 2.5% during the same period.
The approval of a spot Ethereum exchange-traded fund (ETF) is seen as a key catalyst for Ether’s bullish prospects. The United States Securities and Exchange Commission (SEC) is currently reviewing the matter, and a final decision is expected by May 23. However, Bloomberg senior ETF analyst James Seyffart does not consider approval as the most likely outcome.
The recent upgrades to the Ethereum protocol should not be overlooked. The Dencun hard fork, which took place on March 13, aimed to enhance the network’s scalability and improve layer-2 data processing capabilities. This upgrade is highly sought after by rollup solutions. Consequently, transaction fees for most applications on Arbitrum, Optimism, and Base have significantly decreased. This is expected to encourage Ethereum users to adopt layer-2 solutions.
Competitors like BNB Chain (BNB) and Solana (SOL) offer significantly lower transaction fees at the base layer, making them more accessible to newcomers. Despite this, the positive impact of the upgrades on Ethereum’s ecosystem is evident. Solana’s decentralized application (DApps) volumes have increased by 57% over the past week, according to DappRadar.
One bearish factor for Ether’s mid-term price is the complex regulatory environment in the United States. The SEC is scrutinizing companies for possible connections with the Ethereum Foundation and aiming to classify Ether as a security. This move by the SEC was triggered by Ethereum’s transition from a proof-of-work to a proof-of-stake network. Market experts suggest that the SEC’s probe into Ether’s security status could serve as a pretext to deny spot Ether ETF applications.
To determine if professional traders have turned bearish after Ether’s price decline, the ETH options 25% delta skew can be used as a proxy. A skew metric above 7% indicates expectations of a price drop, while a negative 7% skew reflects bullish sentiment. From March 21 to the present, the ETH options 25% skew has increased from 0% to 5%, suggesting cautious skepticism towards the $3,200 support level. However, despite the price correction, the skew metric has remained in neutral territory, indicating that bearish sentiment has not intensified.
Looking at the bigger picture, the Ethereum network maintains its leading position in terms of deposits, with a total value locked (TVL) of $94 billion. BlackRock, the world’s largest asset manager, launching a tokenized asset fund on Ethereum further solidifies the network’s prominence. Therefore, there is no compelling reason to doubt that Ether’s support at $3,200 will break in the near future.
Please note that this article does not provide investment advice or recommendations. Readers should conduct their own research before making any investment or trading decisions.