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Ether (Ethereum) prices lost support at $3,600 on Jan. 5 as the minutes of the Federal Reserve’s December FOMC meeting showed regulators committed to shrinking the balance sheet and raising interest rates in 2022.
Even with the looming overhead, Ethereum has its own problems — more specifically, the persistent $40 and higher average transaction fees. Jan 3, Vitalik Buterin said Ethereum needs to be lighter In terms of blockchain data, more people can manage and use it.
The worrying part of Buterin’s interview is the status of the Ethereum 2.0 upgrade, which is only halfway through six years later. Subsequent roadmap phases include the “merge” and “surge” phases, followed by a “full sharded implementation.” Buterin said that once implemented, they would lead to an estimated 80 percent of the network upgrades being completed.
For those analyzing Ether’s performance over the past t months, the current pricing seems attractive as the cryptocurrency is currently down 34% from its all-time high of $4,870. However, this short-sighted view ignores Ethereum’s 560% gain as of November 10, 2021.
Additionally, the Ethereum network’s adjusted total value locked (TVL) has fallen by 17% since ether’s price peak.
As the chart above shows, the network’s TVL fell from $166 billion to its current level of $138 billion. At the same time, the TVL of competing smart contract networks has also increased, such as Terra, from $11 billion to $18.7 billion. Fantom also increased the value locked in its smart contracts from $5 billion to $9 billion.
Professional traders have apparently grown frustrated and anxious due to delays in network upgrades, deteriorating macroeconomic conditions and a three-month price correction.
Ether futures on bearish edge
Quarterly futures are often the vehicle of choice for whales and arbitrage desks due to their settlement dates and price differences from the spot market. However, the biggest advantage of these contracts is the non-volatile funding rate.
These fixed-month contracts typically trade at a slight premium to the spot market, suggesting sellers are demanding more capital to extend settlement times. Therefore, futures should trade at an annualized premium of 5% to 15% in healthy markets. This situation, technically defined as a “contango,” is not unique to the crypto market.
As shown above, Ether’s futures contract premium has fallen from 20% on October 21 to a meager 5.5%, just above the neutral market threshold. While the basis indicator remained positive, it was at its lowest level in six months.
A dip below $3,000 on Jan. 10 was enough to wipe out any bullish sentiment, and more importantly, high fees and delayed upgrades on the Ethereum network may have scared off some investors.
Right now, the data shows little sign that the bears are ready to take the helm. If this were the case, the ether contango would turn negative.
The views and opinions expressed here are solely those of author Does not necessarily reflect Cointelegraph’s views. Every investment and trading action involves risk. You should do your own research when making a decision.
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