Ethereum price data points to a rally above $3.4K
The price of Ether experienced an 18% decline to $2,826 between July 1 and July 8, but has partially recovered. Investors were understandably disappointed, especially since $313 million of leveraged long positions were lost during this period. Although the current price of $3,100 is still below the previous support level of $3,400, Ether traders are slowly regaining their confidence, as indicated by onchain and derivatives indicators.
Ether supply on exchanges continues to decline
Although the launch of the spot Ethereum exchange-traded fund (ETF) in the United States is taking longer than expected, strong fundamentals suggest that the price may recover soon. US Securities and Exchange Commission Chairman Gary Gensler recently said that approvals for the S-1 filing are expected “sometime in the summer,” meaning before the end of September. However, the exact timeframe is uncertain, leaving traders with reasons to maintain a level of uncertainty.
Bitcoin (BTC) ETFs saw $654 million in inflows over the past three days, with excitement for the latest launch building. Matt Hougan, chief investment officer of Bitwise, has suggested that Ethereum ETFs could attract up to $15 billion in revenue in the first 18 months of trading.
Although this estimate is off by 50%, analysts believe that the price of Ether (ETH) will benefit from the supply chain locked in staking and decentralized applications (DApps).
OnChain analyst Leon Wideman said 40% of Ether's supply is locked up, accounting for staking and dapps, and the exchange's supply decreased last month. According to Glassnode data, deposits on exchanges dropped to 12.21 million ETH from 13.34 million ETH two months ago.
Generally, having fewer coins available for quick trades means that investors are less likely to sell in the short term.
The Ethereum network's total value locked (TVL), the total deposit in the DApp ecosystem, including layer-2 bridges, is unchanged from a month ago at 17.7 million ETH. This data supports the idea of reducing liquidity on fiat exchanges, considering that Ethereum's average transaction fee is over $2 and is much higher than many of its competitors, such as Solana (SOL) and BNB Chain (BNB).
Ethereum layer-2 activity growth and volatile ETH derivatives markets
Investors seeking low fees have benefited from Ethereum layer-2 solutions, which have seen significant activity over the past month.
In the last 30 days, Ethereum DApps have recorded a volume of $200.9 billion, but the layer-2 ecosystem has expanded significantly. For example, Arbitrum's volume rose to $52.4 billion, a 94 percent increase, Blast grew 62 percent to $51.1 billion, and Base grew 57 percent to $18.4 billion. In contrast, direct competitors such as BNB Chain and Solana saw an average decline of 27 percent.
Although ETH traded at its lowest level in nearly three months on July 8, Ether derivatives showed little enthusiasm from the bears. The demand for call (buy) options was twice that of put (sell) options, which indicates the lack of increase in volumes for neutral-to-bear strategies using ETH options.
The data showed a slight increase to 0.8 on July 8, meaning that the volume traded in ETH options was 20% lower than in call options. However, this indicator quickly returned to its 7-day moving average of 0.55, making the volume of call options 85% favorable.
Both derivatives and onchain metrics support the bullish momentum, while the drop in ETH available for trading on fiat exchanges also supports short-term price resistance above $3,400.
This article does not contain investment advice or recommendations. Every investment and business activity involves risk, and readers should do their own research when making a decision.
