Ether (ETH) experienced a significant drop of 21% from April 9 to April 14, reaching its lowest point in 50 days. Although it has recovered some of its losses, Ether is still showing signs of weakness after failing to break through the $3,200 resistance on April 14. Traders are now concerned about whether the $3,000 support will hold.
Investors are cautiously optimistic about the potential approval of a spot Ether exchange-traded fund (ETF) in May. However, the data from on-chain and derivatives sources are giving mixed signals, suggesting that there may be further corrections before the U.S. Securities and Exchange Commission (SEC) makes its decision.
Jan van Eck, the CEO of VanEck investment firm, expressed doubt that spot Ether ETFs would be approved in May. He pointed out that the SEC has been inactive for an extended period regarding 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 lack of “critical feedback” from the regulator, even in face-to-face meetings, indicates that the odds of approval are low, 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 oversimplifying to attribute Ether’s recent decline solely to the dim prospects of spot Ether ETF approval, especially since Bitcoin (BTC), the leading cryptocurrency, also experienced a 14% drop 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). Conversely, Solana (SOL) experienced a much steeper fall. However, these figures do not necessarily reflect the activity levels within each network’s DApps. Therefore, it is important 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, reaching 16.4 million ETH, which is a 14.8% increase on a month-to-month basis. 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 Ether’s prospects, it is vital to analyze DApp activity and ETH derivatives. Not all DApps require substantial deposit bases, so it is important 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 is used as a proxy for user engagement with DApps, Ethereum’s decline was less severe compared to the BNB Chain, which saw a 7% decrease.
Analyzing ETH options is crucial to gauge whether professional traders have become more pessimistic about Ether’s prospects. A delta skew metric above 7% suggests 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, as indicated by derivatives markets on April 16, suggests that further price corrections for ETH below $2,900 should not be overlooked.
This article does not provide investment advice or recommendations. Every investment and trading decision carries risks, and readers should conduct their own research before making a decision.