Metric loss

Key Ethereum Price Metric Hits 6-Month Low As ETH Falls Below $3,000

Ether (ETH) price lost support at $3,600 on January 5, as minutes from the Federal Reserve’s December FOMC meeting showed the regulator had pledged to reduce its balance sheet and to raise interest rates in 2022.

Even with these looming overheads, Ether has its own issues, specifically the ongoing average transaction fees of $40+. On January 3, Vitalik Buterin said that Ethereum needs to be lighter in terms of blockchain data so that more people can manage and use it.

The concerning part of Vitalik’s interview was the status of the Ethereum 2.0 upgrade, which is only half-implemented after six years. The next phases of the roadmap include the “merge” and “overload” phases, followed by the “full sharing implementation”. Once implemented, they will lead to an estimated 80% completion of the network upgrade, according to Buterin.

Ether price on Coinbase, USD. Source: Trading View

For those analyzing Ether’s performance over the past 3 months, the current price looks attractive as the cryptocurrency is currently down 34% from its all-time high of $4,870. However, this short-sighted view ignores the 560% gain Ether had accrued through November 10, 2021.

Additionally, the network’s Total Adjusted Value Locked (TVL) has fallen 17% since Ether’s price spike.

Total Ethereum network value locked, USD. Source: DéfiLlama

As noted above, the network’s TVL has grown from $166 billion to the current $138 billion. Meanwhile, competing smart contract networks like Terra saw their TVL drop from $11 billion to $18.7 billion. Fantom also increased the value locked on its smart contracts from $5 billion to $9 billion.

Due to network upgrade delays, deteriorating macroeconomic conditions, and a 3-month long price correction, professional traders are clearly becoming frustrated and anxious.

Ether futures are about to turn bearish

Quarterly futures contracts are generally preferred instruments by whales and arbitrage desks due to their settlement date and price difference from spot markets. However, the biggest advantage of the contract is the absence of a fluctuating financing rate.

These fixed-month contracts typically trade at a slight premium to spot markets, indicating that sellers are asking for more money to delay settlement longer. Therefore, futures should trade at a 5-15% annualized premium in healthy markets. This situation is technically defined as “contango” and is not exclusive to crypto markets.

Ether Futures 3-month annualized premium. Source: Laevitas

As noted above, the Ether futures premium fell from 20% on October 21 to a meager 5.5%, just slightly above the neutral market threshold. Although the basic indicator remains positive, it has reached the lowest level for 6 months.

The crash below $3,000 on January 10 was enough to wipe out any bullish sentiment and, more importantly, the high Ethereum network fees and delayed upgrades may have scared off some investors.

Currently, the data shows few signs that the bears are ready to take the helm. If so, the Ether futures premium would have turned negative.

The views and opinions expressed herein are solely those of the author and do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk. You should conduct your own research when making a decision.