It shows the price of Ethereum making a short-term rally to the $3.2K level
The price of ether (ETH) fell from $3,203 on August 2 to $2,188 on August 5, hitting a seven-month low. This crash followed a broader market correction in the crypto sector. However, with the price of Ether rising by 23.7% in less than 36 hours from its August 5 low, traders are now questioning whether ETH can return to the $3,000 mark.
How does the market feel about ETH?
To understand whether this pullback from the August 5 lows is sustainable, it is important to analyze the factors behind the initial price decline. Some analysts suggest that the Japanese stock market started the selloff after the Nikkei 225 lost 13% on August 5. The move follows the Bank of Japan's decision to raise interest rates for the first time in 17 years on July 31. .
Although the Nikkei 225 closed up just 4.6% on August 5, the effects were felt across markets. The S&P 500 index fell 3%, and gold fell 2.7% to $2,477 from August 5. Ether's decline was more pronounced due to the high volatility in the cryptocurrency sector and the excessive leverage used by ETH bulls. This divergence explains how Ether was able to reclaim the $2,500 level on August 6.
With the S&P 500's 2.9% gain since August 5th, is there enough momentum to sustain Ether's price recovery to the previous week's $3,000 level? On the macroeconomic front, uncertainty continues after major tech companies including Microsoft and Intel reported second-quarter earnings below market estimates. Additionally, the entire artificial intelligence sector is under scrutiny, with Nvidia stock trading 25% below its all-time high. Recent weak US jobs data further dampened investor sentiment.
Analyzing ETH futures and options metrics, along with overall demand for Ethereum network usage based on onchain metrics, is critical to predicting whether Ether traders will remain optimistic after the crisis. For example, to account for the longer settlement period, Ether monthly futures must trade 5-10% higher per year compared to regular spot markets.
The Ether futures premium briefly dipped below the neutral threshold of 5% on August 5, but managed to remain above 6% that day. Although this is below the 11% level seen a week ago, which shows optimism, the data shows a balanced interest in demand between ether bulls and bears using futures contracts.
Ether options markets and onchain metrics have shown some resistance.
Aiming to capture fixed income, Ether options markets should be evaluated to ensure that this measure is not affected by cash and is not a trade-off. When fear dominates, sell (sell) call options trade at a price that pushes the delta skew indicator above 7%.
The ETH skew moved to the highest level in three months by 1.8%, still within the neutral 7% limit. In fact, the last time bullish sentiment dominated Ether options was on July 23rd, when the scale dropped to -8%. This shows a slight deterioration in the parameters of ether derivatives, but both futures and options reflect neutral sentiment.
Related: Ethereum Fast Recovery Spots ETH Price for 100% Rally
Finally, initial data should be checked with onchain metrics to understand whether demand for Ethereum's decentralized applications has been affected by the price drop. Total Value Locked (TVL), a measure of deposits in the entire ecosystem, increased to 19.2 million ETH on August 5, the highest level since November 2022, according to Defilama data.
In conclusion, there is nothing preventing Ether's price recovery other than broader economic uncertainty and a general risk market. If the S&P 500 continues to show strength, ETH could regain the $3,000 support from last week.
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.
