Unstoppable! Ethereum price has pumped to $3,000!

Written by: Marcel Pechman, COINTELEGRAPH

Compiled by: Gabriel, Techub News

Key point:

Despite the influx of funds into spot ETFs and the increase in Total Value Locked (TVL), the Ethereum futures and options market still shows a wait-and-see attitude.

The growth of Layer-2 networks and the decrease in transaction fees have not translated into increased demand for ETH or sustained upward price momentum.

Ethereum (ETH) price rose 13.5% in two days, reaching $3,000 on Thursday, but traders remain skeptical about its ability to hold this level. Despite the recent bullish trend in the market, the ETH derivatives market shows a lack of confidence, raising doubts among traders about the potential for further upside.

The monthly futures premium for Ethereum is currently at 5%, on the edge of neutral and bearish territory. Although this figure has risen from last week's 3.5%, the last significant bullish signal was on January 23, when the ETH price was above $3,300. Professional traders' pessimism has eased, but there is still a considerable gap from being fully confident in a sustained price increase.

The Ethereum Layer-2 ecosystem is thriving, but the decline in transaction fees has not boosted ETH demand.

ETH is still down 41% from its all-time high in November 2021, which partly explains the market's cautious attitude. More importantly, the decline in Ethereum network fees has led to a decrease in the ETH burn rate. Since Ethereum's built-in burn mechanism relies on network activity, a decrease in network usage means more ETH remains in circulation, thus putting downward pressure on the price. According to Nansen data, Ethereum network fees dropped by 22% in the past 30 days, falling to $34.8 million. Although this trend has affected the entire blockchain industry, ETH investors are particularly disappointed. The reason is that the increase in Total Value Locked (TVL) has not translated into heightened demand for ETH itself.

As of Thursday, the total value locked (TVL) in the Ethereum network has risen from $50 billion three months ago to $73 billion. However, the trading volume on decentralized exchanges (DEX) has dropped to its lowest level in nine months. Despite the previous meme coin craze being difficult to sustain, many ETH investors had hoped that this level of activity could last longer. The Ethereum Layer-2 ecosystem has performed better than expected, generating $58.6 billion in DEX trading volume over the past 30 days. However, the initiative to reduce Rollup fees through data sharding has not significantly increased demand for ETH.

In contrast, Solana's TVL is only 14% of Ethereum's, but its network fees have reached $25.3 million. Tron’s fee revenue in the last 30 days has also exceeded Ethereum by 60%. To determine whether the lack of market confidence is limited to the futures market, one can refer to the performance of the options market. When traders seek exposure to price increases through call options, Delta skew typically falls below the neutral range (-5% to +5%). Conversely, the demand for downside protection will push this indicator higher.