Ether (ETH) price faced stiff resistance at $1920 after the 17.5% rally between June 15-22. Several factors contributed to the limited upside, including worsening macroeconomic conditions, the regulatory environment for cryptocurrencies, and weaker demand for decentralized applications (DApps). ) on the Ethereum network.
ETH Price Faces Macroeconomic Headwinds
On June 26, a federal judge rejected a motion by Binance that could have prevented the US Securities and Exchange Commission (SEC) from issuing public statements related to the case.
Also, in its mid-year perspective, the HSBC Asset Management report warned of an economic recession in the United States in the fourth quarter, followed by a “year of contraction and a European recession in 2024”. The report also noted that “corporate defaults have begun to rise.”
Finally, the Chief Economist of the IMF, Gita Gopinath said CNBC on June 27 that central bankers should “continue tightening” by keeping interest rates high for longer than expected.
Ethereum network demand, gas fees drop
The use of DApps on the Ethereum network did not gain momentum as gas fees fell by 60%. Notably, the 7-day average transaction cost dropped to $3.7 on June 26, down from $9 four weeks earlier.
Active Dapp addresses also decreased by 27% in the same period.
Note that the decline was concentrated in the Uniswap and MetaMask Swap, while most non-fungible token (NFT) markets saw an increase in their unique active wallets (UAW).
Despite the mediocre performance of the UNiswap NFT Aggregator, the sector faced a decent influx of users on OpenSea, Blur, Manifold, LooksRare, and Unick.
Most concerning, however, is that Total Value Locked (TVL), which measures deposits locked in Ethereum smart contracts, reached its lowest level since August 2020. The indicator declined 6.9% between May 28, April and June 28 to 13.9 million ETH, according to DefiLlama.
ETH Price Rally Is Not Supported By Derivatives Markets
So how do professional traders position themselves for the next ETH price move? Let’s take a lot on Ether futures to gauge the odds of ETH/USD breaking above the $1,920 resistance.
Quarterly ETH futures are the instruments of choice for whales and arbitrage desks. However, these fixed-month contracts typically trade at a slight premium on the spot markets, as they require an additional fee to postpone settlement.
As a result, in healthy markets, ETH futures contracts should trade at a 5-10% annualized premium, a situation known as contango.
According to the futures premium, known as the basis indicator, professional traders have been avoiding leveraged long positions (bullish bets). Despite the modest improvement to 3%, the metric remains well below the neutral threshold of 5%.
To exclude externalities that might have affected only Ether futures, the ETH options markets should be analyzed. The 25% delta bias indicator compares similar call and put options and will turn positive when fear prevails because the protective put premium is higher than call options.
The bias indicator will move above 8% if traders fear an Ether price drop. On the other hand, general enthusiasm reflects a negative bias of 8%.
As shown above, the delta bias has been flirting with subdued optimism since June 22, but has not been able to sustain it for long. Currently, the negative 2% metric shows balanced demand for options.
Resistance below $2,000 remains formidable
Judging by ETH derivatives metrics, TVL and Dapps usage decline, the bears are in a better position to defend the $1,920 resistance. Furthermore, worsening macroeconomic conditions and the flow of cryptocurrency regulatory news confirm moderate pessimism for risk assets, including Ether.
Related: 3 Reasons Why Ethereum Market Cap Dominance Is On The Rise
That doesn’t necessarily mean Ether is bound to retest $1,750, but it certainly presents a massive hurdle for ETH bulls after failing to break the $1,920 level three times between June 21-25.
Consequently, at least in the short term, Ethereum bears have a better chance of successfully defending this important price level.
This article is for general information purposes and is not intended to be and should not be taken as legal or investment advice. The views, thoughts and opinions expressed herein are those of the author alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.
