Ether (ETH) experienced an 8% price increase on Tuesday, reaching near the $3,000 mark. However, derivatives markets indicate a prevailing skepticism regarding further upside potential. This movement coincided with a broader cryptocurrency market rally, fueled by traders anticipating increased economic stimulus, particularly in light of recent stress observed in Japan's government-bond market.
Investor sentiment saw an improvement as confidence grew in a less restrictive US monetary policy. The Federal Reserve concluded its balance-sheet reduction program on December 1st, and market participants are looking towards an interest-rate cut on December 10th. Furthermore, significant financial institutions in the US have notably increased their use of repurchase agreements, injecting liquidity into short-term funding markets.
The Nasdaq index, heavily weighted towards technology stocks, has recovered most of its November losses and is now trading approximately 3% below its all-time high. Despite this recovery in traditional markets, Ethereum's derivatives positioning remains tight, suggesting a lack of strong conviction among bullish traders.
On Tuesday, the annualized premium on ETH monthly futures compared to spot markets remained at 3%, unchanged from the previous week. Readings below 5% typically signify weak demand for leveraged long positions, which is an understandable sentiment given Ether's 22% decline over the past 30 days.
Ether Lags Stocks Amid Global Policy Shifts
Ethereum's underperformance relative to the US stock market is a point of concern, particularly as central banks signal a move towards more expansionary economic policies.
The Federal Reserve injected $13.5 billion through overnight funding on December 1st, marking the second-highest level in over five years. This facility, designed as a liquidity backstop, once held more than $2.5 trillion in spare cash in 2022, a period characterized by stimulus efforts and extremely low interest rates. However, these balances were later withdrawn as participants sought higher returns elsewhere.
Additional factors may be contributing to subdued crypto demand. These include concerns about excessive investment in artificial-intelligence infrastructure and renewed regulatory scrutiny on stablecoins. China's central bank has also pledged to intensify its crackdown on money-laundering activities and unauthorized cross-border transfers involving digital assets.
Professional Ether traders continue to express unease about potential downside risks, a sentiment reflected in the persistent stress observed across options markets.
ETH put (sell) options are trading at a 6% premium to comparable call (buy) contracts. This pattern is typically associated with bearish market conditions. For context, the skew metric was at a neutral 4% on Friday. This shift suggests that certain factors are still tempering traders' optimism, even as the rally in US equities indicates an improving risk appetite in traditional markets.
Ethereum network fees have declined to their lowest level in over three years, falling to $2.6 million over a seven-day period, down from $5.1 million four weeks prior. A portion of this decrease is attributed to a reduction in activity on decentralized exchanges, where volumes dropped to $13.4 billion during the same period, a significant decrease from the peak of $36.2 billion recorded in August.
More notably, rival chains such as Tron and Solana have reported a 9% increase in seven-day fees, according to data from Nansen. The movement of a dormant Ether whale on Sunday has also contributed to investor anxiety. An entity that has been active since Ethereum's genesis block in 2015 transferred 40,000 ETH to a new address, sparking speculation about a potential sale.
Ethereum's upcoming Fusaka upgrade, scheduled for December 3rd, represents a significant step towards improved scalability and an enhanced wallet management experience. Nevertheless, the demand for decentralized applications has weakened, resulting in lower network fees. Currently, there is limited evidence to suggest that ETH is positioned to outperform the broader cryptocurrency market.