Key Points:
Ethereum's price has climbed to $2,470, but futures and options data show that traders have serious doubts about bullish confidence.
Despite the continuous inflow of funds into spot Ethereum ETFs, low network fees and increasing competition still put pressure on Ethereum's price outlook.
Ethereum jumped 17% from a low of $2,115 on June 22 to $2,470, responding positively to news of a ceasefire agreement between Iran and Israel. As the market predicts a reduction in geopolitical risks, oil prices have fallen to a two-week low.
However, despite the easing geopolitical situation, professional Ethereum traders remain cautious about taking bullish positions.
In a neutral market, Ethereum's monthly futures typically trade at an annualized premium of 5% to 10% to account for extended settlement periods. On June 24, this indicator slipped to a bearish 3% level. Since Ethereum failed to hold above $2,700 on June 12, interest in leveraged long positions has remained low.
Notably, the Ethereum exchange-traded fund (ETF) listed in the U.S. recorded a net inflow of $101 million on June 23, reversing a $11 million outflow on June 20. However, factors hindering bullish leverage demand are unlikely to change simply because Ethereum rises 10% to $2,660 or the ETF attracts an additional $300 million inflow.
The core concern for investors lies in the significant gap between Ethereum's $293 billion market cap and its monthly network fees of only $41 million. Whether the reduction in Layer 2 fees is intentional or not, network activity must increase significantly to sustain staking rewards without inflating Ethereum's supply.
While Ethereum leads in total deposits by a wide margin, its fee income is only $8 million higher than Solana. For reference, Ethereum's total value locked (TVL) is as high as $66 billion, while Solana's is only $10 billion. More strikingly, Tron collects $56 million in fees monthly, despite its TVL being less than $5 billion.
The Ethereum options market further reveals the cautious sentiment among large investors. In a balanced state, the skew indicator should remain between -5% and +5%. Readings above this range indicate that market makers are unwilling to provide downside protection.
Currently, the 2% skew is entirely within the neutral range, although it briefly approached bearish territory on June 22. More importantly, since June 11, the skew of Ethereum options has not fallen below -5%, indicating that traders generally believe that only a breakthrough and stabilization above $2,800 can trigger a true bullish shift.
It has been over 20 weeks since Ethereum last traded above the $3,000 mark, leading to a gradual weakening of trader confidence. The lack of rekindled optimism in the market is also due to increasing competition in the decentralized application (DApp) space, particularly strong challenges from Solana and BNB Chain.
It remains unclear what factors could reignite strong buying interest in Ethereum. Establishing a lasting bullish trend may require Ethereum to demonstrate a clear competitive advantage. Unless Ethereum achieves differentiation through substantial institutional adoption or network dominance, the short-term outlook for breaking the $3,000 mark remains bleak.
This article is for general reference only and should not be considered legal or investment advice. The views, thoughts, and opinions expressed in the article are solely those of the author and do not necessarily reflect or represent the views and opinions of Cointelegraph.
Original article: “Ethereum (ETH) trades near $2.5K, but weak demand clouds bullish outlook”
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