Ether (ETH) price had been fighting the $1,850 resistance level, but broke through on April 4 when Ether surged to a seven-month high above $1,900. There has been a lot of speculation recently about Ether price catalysts. Let’s see if it is possible to identify any fundamental factors behind the price movement.
The upcoming Shanghai hard fork could be a factor in Ether’s recent bullish momentum. On April 12, the possibility for validators to withdraw their deposits opens up, giving staking participants freedom of movement, but also creating a sell-off risk for Ether.
There are now 17.81 million ETH staked on the Beacon Chain, although some security measures have been put in place to prevent a rush of Ether from disrupting the market. For example, because there is a daily limit of 2,200 withdrawals, the maximum daily unlocks are 70,000 ETH.
Scalability and selfish validator risks are still present
However, the upcoming Shanghai hard fork does not address some of the most pressing issues currently plaguing the Ethereum network. Scalability is still a major issue for most users, as the average transaction fee has hovered around $5 in recent weeks, driving users away from decentralized applications (DApps).
Additionally, the current consensus mechanism favors rogue miners who outperform other network participants, a phenomenon known as miner’s mineable value (MEV). They can quickly duplicate all winning transactions in the mempool and execute their transactions before everyone else by ultimately deciding which transactions are completed in the block.
A recent example, highlighted on April 3 by security firm CertiK, resulted in $25 million in losses for arbitrage bots trying to buy and flip tokens in a short period of time for profit, as a selfish validator replaced the transactions.
Over the past 30 days, the top 10 DApps running on the Ethereum network have seen an 18% drop in active addresses, possibly reflecting investor dissatisfaction with current miner-front issues and high costs. transaction.
Let’s look at the Ether derivatives data to understand if the $1850 level can effectively become support according to ETH investor sentiment.
ETH derivatives show no improvement despite price rally
The annualized premium for three-month futures should trade between 5% and 10% in healthy markets to cover costs and associated risks. However, when the contract is trading at a discount (backwardation) compared to traditional spot markets, it shows a lack of confidence on the part of traders and is considered a bearish indicator.
Despite ETH’s 35% rally in 25 days, the Ether futures premium has not been able to break above the 5% neutral threshold. However, the absence of a long demand for leverage does not always imply an expectation of negative price action. As a result, traders need to examine the Ether options markets to understand how whales and market makers price the probability of future price movements.
The 25% delta bias is a telltale sign when market makers and arbitrage desks are overcharging for upside or downside protection. For example, in bear markets, option investors have a higher chance of a price decline, causing the bias indicator to rise above 8%. On the other hand, bull markets tend to drive the bias metric below -8%, meaning bear put options are less in demand.
Related: Ethereum projects unite to protect users from MEV-induced high prices
Since April 1, the delta bias has been close to zero, indicating similar demand for protective puts and neutral to bearish calls. Since March 22, when Ether options last showed extreme bullishness, this has been the norm.
Even after adjusting for the additional negative pressure of the Shanghai hard fork token unlock, Ether faces serious problems due to scalability and anticipated transactions. As a result, derivatives and on-chain DApp metrics increase the probability of ETH falling below $1,850.
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