It is highly unlikely that the Ethereum futures market will raise to $3.7K

The price of Ether (ETH) may be on the brink of the most important event in spot ETH ETF integration of altcoins with traditional financial markets, but the price is not reacting as expected. In fact, on June 24, Ether hit its lowest level in a month, falling to the $3,250 level. Although ETH finally found support at $3,400 on June 25, both onchain and derivatives metrics suggest that upside potential is limited.

Analysts say that the launch of the ETH ETF may be disappointing

Some analysts believe that the launch of the Ethereum spot exchange-traded fund (ETF) is unlikely to result in significant net inflows in the current market conditions. Although the regulator dropped its investigation into Ethereum ecosystem company Consensys and avoided classifying Ethereum stock as a security, the broader economic climate remains challenging.

Bloomberg ETF analysts Eric Balchunas and James Seifert project that Ethereum ETFs could attract $1 billion to $2 billion in the first few weeks. Similarly, Stephen Richardson, manager of financial markets at FireBlocks, told Cointelegraph that he expects very low returns on the launch of the Ethereum ETF.

According to Markus Thielen, the head of research at 10x Research, the income generated by Ethereum is “small” compared to the market capitalization, which shows that the asset does not currently represent a “viable, sufficient cash flow-generating investment”. Thielen also pointed out that the yield from Ether stocks is lower than that from US Treasury bonds.

Despite the more favorable cryptocurrency regulatory environment in the US, it is important not to ignore macroeconomic trends. The US Conference Board reported on June 25 that its consumer confidence index fell to 100.4 from 101.3 in May, suggesting households are concerned about inflation, Yahoo Finance reported.

Also on June 25, US Federal Reserve Governor Michelle Bowman reiterated that interest rates will remain elevated “for some time,” as reported by Yahoo Finance. Bowman said inflation was still “high” and stressed that any change in financial conditions or additional fiscal stimulus would push inflation higher. The Federal Reserve's average forecast is for one rate cut before the end of the year, thereby maintaining the appeal of fixed income investments.

High Ethereum network fees and reduced demand for ETH leverage

The Ethereum network faces its own challenges, including relatively high gas fees, which have reached $3 per transaction on the base layer. This issue partially explains why competing blockchains like BNB Chain (BNB) and Solana (SOL) have been able to capture significant volumes.

Despite these challenges, Ethereum remains the undisputed leader in total value locked (TVL) and decentralized application volumes. However, according to Dapradar, there has been no growth in demand in the last seven days, with competitors such as Solana and Aptos seeing increased activity and deposits. While the Ethereum layer-2 ecosystem is strong, one should not overlook the challenges faced by these incumbents.

To understand the sentiment of Ether professional traders, ETH futures parameters should be examined. Ether futures premiums reflect the difference between monthly contracts in derivative markets and spot rates on regular exchanges. Typically a 5% to 10% annual premium (basis) is expected to compensate for the extended settlement period.

The Ether futures premium fell below the 10% threshold on June 21 and has since remained in neutral territory. This change marks a change in trend after five weeks of bearish sentiment, especially since US Securities and Exchange Commission Chairman Gary Gensler confirmed the launch of an Ethereum spot ETF in September.

As Markus Thielen pointed out, the network's revenue is only $23.9 million per week, so it is challenging to determine the value of the Ethereum token based on Defillama's data. By comparison, Tron and Solana, which have far fewer deposits, generate $8.8 million and $9.8 million, respectively. Therefore, if analysts' expectations of lower ETF earnings are confirmed, the likelihood of Ether going above $3,700 in the near term seems slim.

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.