As investor guilt fades, Ether struggles towards $3,000

Main Receptors:

ETH is below $3,000 as repeated crash failures undermine trader confidence and stifle short-term momentum.

A sustainable ETH rally requires strong network activity and DApp demand to offset weak capacity and ETF flows.

Ether (ETH) traded in a narrow 4% range last week, with traders questioning the $2,900 support level. Repeated failures to break above $3,000 have been linked to lower Ethereum network fees and muted demand for Ether exchange-traded funds (ETFs).

This lack of conviction can also be seen in the ETH derivatives markets, prompting traders to reassess whether a sustained recovery is still possible in the near term.

ETH monthly futures were trading at a 3% annual premium to the spot market on Tuesday, indicating extremely low interest in the spot market.

In isolated cases, this premium has exceeded 5% to compensate for longer settlement times, but has remained below that threshold for the past two weeks.

Ethereum fees fall even as network activity increases

Weak investor sentiment can be partially explained by the fall in Ethereum network fees as traders anticipate low demand for ETH.

More importantly, demand for competing blockchains focused on decentralized applications (DApps) continues, leading investors to question why the Ethereum network is lagging behind.

While the number of transactions increased by 10% during the period, Ethereum network fees fell by 26% from their inception. At first glance, the activity of Ethereum has not disappeared. But a significant part of ETH's price outlook depends on the demand for blockchain processing.

In comparison, transactions on BNB Chain and Solana were largely flat during the same seven-day window. It is necessary to assess the effective use of DApps on the network to determine whether the demand for Ether remains strong.

Payments generated by Ethereum DApps have remained relatively flat over the past four weeks, though below the $140 million peak recorded in October. The data shows that the activity on the Ethereum network has stopped, but it is far from collapsing.

The lack of optimism surrounding ETH's short-term momentum is also reflected in selling pressure on Ether ETFs. This measure is typically associated with institutional interest, especially since these instruments have seen approximately $17 billion in inflows.

BlackRock's iShares Ethereum Trust ETF ( ETHA US ) leads the pack, with $10.2 billion under management.

The $307 million in daily outflows from Ether ETFs since December 17 may not be materially significant, as it represents less than 3% of total assets, but the lack of interest still weighs on investor sentiment. Even professional traders may be skeptical of holding above the $3,000 level after two weeks of repeated declines in ETH.

Related: Ethereum quietly sets record: 8.7M contracts deployed in one quarter

Additionally, it is difficult to separate Ether's poor performance from broader concerns related to the global economic slowdown.

When governments face tight fiscal conditions, central banks have little room to cut interest rates, increasing risks of recession. As a result, investors should be cautious in the cryptocurrency market until there is more clarity on the economic outlook.

While weak bullish ETH leveraged positions and demand for Ether ETFs are not a death sentence, a sustained rally depends on strong Ethereum network activity and increased demand for DApps.

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