The three-month decline in Ether (ETH) has been broken for a variety of reasons. The price recovered 43% after 15 days, however the declining channel’s resistance was broken on February 7th.
It hasn’t surpassed $45,500 since January 24, when it plunged 55.6% from a high of $4,870 to a low of $2,160. Then, traders thought that a 12 percent correction was the most likely outcome.
On February 7, the Canadian arm of the Big Four auditor KPMG said that Bitcoin and Ether would be added to its corporate treasury. This is a good thing. Benjie Thomas, the managing partner of KPMG Canada, says that the company thinks that cryptocurrencies are a growing asset class.
Derivatives Figures Contradicting Story
To figure out how confident traders are that Ether’s price will rise again, you should look at perpetual futures data. This is the best market for people who want to trade on their own because the price of this instrument tends to follow the prices of other markets.
People who buy and sell futures are always matched up, but the amount of leverage they use varies. Exchanges will charge the party that wants the most leverage a fee, and this fee goes to the other party.
Indicator: This one will show us if retail traders are getting excited, which would make it go above 0.5%, or 1% a week. Notice how the last two months have shown a slightly negative funding rate, which shows that people aren’t very optimistic. Currently, there is no hint that retail traders are confident enough to reopen leveraged long bets.
Leveraged traders may be concerned about lack of trust, but on-chain data from the Ethereum network must be analyzed. Even if there is no direct correlation between Ether price and network usage, low transaction volume and declining active users may be a problem.
ETH On-chain Raised Concerns
The value of ETH traded on the network is a good way to tell how well it is being used. This metric could be hidden by the rise of Layer 2 solutions, but it’s still a good place to start.
In December, the daily transaction average was $6.2 billion, which is a 55% drop from the December high. It’s also close to the 1-year low of $5.6 billion. Thus, it is safe to say that the use of Ether tokens has not shown any signs of growth, at least on the first level.
Analysts should also look at usage data for decentralized apps. Recall that TVL is usually found on loan platforms and decentralized exchanges (DEX). So, looking at the number of active addresses gives a more complete picture.
Along with Opensea, the non-fungible token (NFT) market, Ethereum dApps saw a 28% drop in active addresses each month. In a nutshell, this is bad data because the smart contract network was made to run decentralized apps.
Unless the number of transactions and dApps used increases slightly, investors will consider any climb in Ether’s price above $3,000 a bull trap. It’s possible that investors are adopting more long bets after a huge price surge.
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