Ethereum Trader Sentiment Remains Cautious Despite Recent Price Gains

Key points:

Evidence from ETH derivatives metrics suggests persistent caution among traders, despite recent price increases.
Ethereum faces competitive pressure from Solana and BNB Chain despite having led other ecosystems in terms of TVL previously.

Ether (ETH) experienced a 56.5% price increase over the past 30 days, yet key derivatives data indicates trader risk appetite remains cautious.

This sentiment contrasts with persistent struggles by Ether to break above the $4,000 threshold since March 2024. Weaker on-chain metrics have intensified investor frustration.

ETH perpetual futures funding rate chart — *ETH perpetual futures annualized funding rate. Source: Laevitas.ch*

The annualized funding rate for Ether perpetual futures dipped to 9%, suggesting lower demand for leveraged long positions. Earlier levels had peaked at a more bullish 19%, although this was unsustainable. Currently, the funding rate has retreated to its level from July 7, despite a prior 46% price increase.

ETH Traders Disappointed as Network TVL Drops

A significant factor contributing to trader disappointment is the substantial decline in Ethereum’s Total Value Locked (TVL). TVL fell to a five-month low of 23.4 million ETH, down 11% from levels 30 days prior.

Comparatively, leading layer-1 ecosystems showed much stronger performance. Solana’s TVL dropped just 4%, while BNB Chain saw a 15% increase.

Furthermore, Ethereum lost its position atop decentralized exchange (DEX) volume leaders. While Ethereum saw $81.4 billion in DEX activity over the past 30 days, Solana handled $82.9 billion and BNB Chain significantly outperformed with $189.2 billion.

*DEX volumes market share comparison. Source: DefiLlama*

Network activity remains crucial, as transaction fees are vital for compensating validators and incentivizing the growth of decentralized applications (DApps).

Ultimately, advantages in TVL or developer activity carry less weight if network transaction activity lags significantly behind rival ecosystems.

To assess the conviction in the current price, examining the ETH monthly futures market provides insight. Under normal circumstances, these trades typically carry a 5-10% annualized premium.

Currently, the ETH futures annualized premium is sitting at 6%, slightly down from Tuesday’s 8% level. It remains in a neutral range over the last three weeks.

Speculative activity remains muted despite a nearly three-week streak of net inflows into spot Ethereum exchange-traded funds (ETFs).

The lukewarm response near the $3,800 mark may reflect concerns about user experience on competing networks. Ethereum faces challenges regarding its capacity at the base layer. Additionally, questions persist about the durability of the recent price surge, which was partly fueled by growing corporate reserves.

Nine publicly listed companies are estimated to hold at least 2,000 ETH each, including Bitmine Immersion Tech (BMNR), SharpLink Gaming (SBET), and The Ether Machine (DYNX), according to Strategicreserve.xyz.

If corporate accumulation continues, the potential trajectory is upward, possibly towards $5,000. However, traders currently show hesitation, failing to view reclaiming the $4,000 benchmark as imminent.

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 here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.