Key takeaways:
- While bearish ETH futures trends and spot ETF outflows signal frail institutional appetite, demand staking is preventing further decline.
- Declining exchange deposits and accumulation by BitMine indicate the holder’s confidence in the long-term value of ETH.
The price of ether (ETH) has failed to regain the $1,700 level over the past week, tracking broader weakness in cryptocurrency markets. This correction contrasts sharply with the upward momentum seen in the US stock market. Traders fear that Ether’s appeal has waned due to sluggish on-chain activity and a clear lack of demand for leveraged bullish positions.
Annual ETH futures funding rate. source: Laevitas
On June 5, the annual funding rate for ETH perpetual futures turned negative, meaning low traders are paying a premium to keep their positions open. Bullish investors are still not comfortable adding risk despite a 30% price correction over the past five weeks. Aggregate open interest in ETH futures also declined significantly, indicating a slowdown in institutional activity.
ETH futures aggregate open interest on major exchanges, ETH. Source: CoinGlass
Total ETH futures exposure fell 30% over the month, reaching a 13-month low. This degenerating institutional appetite is evident in US-listed Ether spot funds, which recorded net outflows of $323 million in two weeks.
ETH staking requirements contrast with frail on-chain activity
Whether or not the decline in ETH futures demand can be linked to record demand for the SpaceX IPO (SPCX US), the impact on investor sentiment remains negative. Ethereum’s degenerating on-chain activity has likely contributed to the decline in the ETH price.
Ethereum’s total locked value compared to weekly DApp revenue, USD. Source: DefiLlama
Total value locked (TVL) on the Ethereum network dropped 33% in two months to $37.5 billion. At the same time, revenues from decentralized applications (DApps) fell by 43% in May compared to the previous six months. This reduced on-chain volume is typically related to lower network fees generated and degenerating ETH utility.
Interestingly, the growing demand for Ethereum staking contrasts sharply with the bearish trend in ETH derivatives. Staking approval for US-listed ETFs and aggressiveness accumulation by BitMine (BTMN US) has significantly outperformed outflows over this period, despite a modest 2.7% return.
ETH, ETH staking validator queue. Source: ValidatorQueue
The queue of entries to ETH staking validators currently lasts 50 days, totaling over 2.9 million ETH. In contrast, the exit queue has zero wait time, which is a major sign of strength considering 39.5 million ETH is currently staked. While there is no guarantee that Stakers will lock up their tokens forever, this indicator signals deep confidence in Ethereum’s long-term prospects.
Related: ETH futures traders are leaning towards lows in the 1.6k range. dollars: will Ether lead to market recovery?
ETH estimated balance on exchanges, ETH. Source: Glass knot
Meanwhile, ETH deposits on exchanges dropped to 15.05 million from 16.15 million three months ago, indicating forceful accumulation. According to CoinGecko data, this change was partially driven by BitMine, which added 337,078 ETH to its balance in the last 30 days.
Ultimately, frail demand for bullish ETH leverage should not be misinterpreted as a sign of increasing risk of loss. As long as staking metrics remain solid and spot outflows of ETF funds remain reasonably confined, the chances of the ETH price falling to $1,500 appear slim.
