Ether (ETH) saw a significant surge in price from March 3 to March 13, increasing by 20% and reaching a double top formation near $4,100. However, after the second rejection, ETH experienced a 20% correction, falling to test the $3,200 support on March 19. Analysts believe that the initial rally was driven by overly leveraged long positions.
The bullish momentum of Ether faded as a result of the forced liquidation of $375 million in ETH futures over the past week. The question now is whether this will be enough to stop the correction and potentially initiate another bull run for Ether.
During the market crash, Ether’s downturn was more pronounced compared to the broader cryptocurrency market. While the market capitalization of cryptocurrencies peaked at $2.77 trillion on March 14 and stabilized around $2.35 trillion, experiencing a 15.5% drop over five days, Ether’s performance was affected by Bitcoin’s 12% weekly drop, Solana’s 21% increase, and Binance Coin’s slight 2% decrease during the same period.
Interestingly, Solana faced difficulties with increased fees and failed transactions as the network struggled to handle the surge in activity, mainly driven by the growing interest in new memecoins. Within just three days, traders injected approximately $100 million into new Solana memecoins, as reported by Cointelegraph.
On March 13, the Ethereum network underwent its most significant upgrade in over a year, coinciding with Ether’s price peak for the current cycle. This hard fork resulted in a significant reduction in transaction fees for layer-2 networks like Arbitrum, Optimism, and Base, thereby improving Ethereum’s scalability. The introduction of data blobs also enhanced the network’s data-handling capabilities.
The success of this upgrade can be seen in the surge of activity on layer-2 solutions, reaching an all-time high with an average of 122 transactions per second (TPS) over the past two days, according to L2beat. This represents a 31% increase from the previous week and is more than eight times the base layer capacity of Ethereum, which is 15 TPS.
Despite the excitement surrounding Ethereum’s network upgrades, the high gas fees on the base layer remain a significant concern, with the average cost hovering around $12 on March 18, according to BitInfoCharts. This situation highlights the ongoing appeal of alternative platforms like Solana and Avalanche (AVAX), which were among the few cryptocurrencies in the top 20 to see gains in the past week.
Despite the price crash, Ether futures indicate moderate bullishness. The 20% correction in Ether since March 13 has led to the ETH perpetual contract funding rate approaching zero, indicating a balance in demand between long positions and short positions, suggesting market equilibrium.
Analyzing the monthly futures can provide insight into whether professional traders have also shifted to a neutral stance. Typically, futures trade at a premium of 5% to 10% over spot exchanges in such markets, reflecting the cost of carrying the investment until settlement. Currently, Ether’s futures are trading at a 22% premium, an unusually high level that suggests excessive demand for long positions, possibly driven by optimism regarding the upcoming decisions on Ethereum’s spot exchange-traded funds (ETFs). Remarkably, this optimism remains strong even after Ether’s price correction to $3,200 on March 19, which could be seen as a bullish signal amidst the broader market recalibration.
It’s important to note that this article does not provide investment advice or recommendations. Readers should conduct their own research and analysis before making any investment decisions.