Key conclusions:
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The ETH futures premium and put option skew show that traders are hedging aggressively despite the 8% jump in price.
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Ethereum’s weekly fees fell 49% due to weakened DEX activity, while Tron and Solana fees rose 9%.
Ether (ETH) gained 8% on Tuesday but stalled near $3,000 as derivatives markets signaled doubts about further gains. The move followed a broader rally in cryptocurrencies as traders appreciated the better prospect of new economic stimulus, particularly after stress in the Japanese government bond market on Monday.
Sentiment improved as investors grew more confident that US monetary policy would become less restrictive. The Federal Reserve (Fed) ended its balance sheet reduction program on December 1st, and traders expect an interest rate cut on December 10th. More importantly, major US financial institutions have sharply increased their use of repurchase agreements, adding liquidity to short-term funding markets.
The tech-rich Nasdaq index has clawed back most of the losses it suffered in November and is now trading just about 3% below its all-time high. Still, ETH derivatives positioning remains firm, indicating limited conviction among bullish traders.
On Tuesday, the annual premium on ETH monthly futures versus the spot market remained at 3%, unchanged from the previous week. Readings below 5% indicate very weak demand for long leveraged exposure, an understandable outcome given Ether’s 22% decline over the past 30 days.
Ether lags stocks as global policy turns expansionary
Ether’s underperformance against the US stock market is cause for concern, especially as central banks signal more expansionary economic measures.
The Fed injected $13.5 billion in overnight funding on Dec. 1, the second highest level in more than five years. Designed as a liquidity buffer, the facility once held more than $2.5 trillion in excess cash in 2022, after stimulus and extremely low interest rates. However, these balances were later withdrawn as participants sought higher returns elsewhere.
Additional factors may affect demand for cryptocurrencies, including fears of overinvestment in AI infrastructure and renewed regulatory pressure on stablecoins. China’s central bank has also pledged to strengthen its measures against money laundering and unauthorized cross-border transfers involving digital assets.
Professional ether traders remain concerned about downside risk, which is reflected in the continued stress in the options markets.
ETH put (put) options traded at a 6% premium to comparable call (buy) contracts, a pattern commonly associated with bearish conditions. For reference, Friday’s skewness metric was at a neutral 4%. The change suggests something is still curbing traders’ optimism, even as the rise in U.S. stocks signals an improvement in risk appetite in traditional markets.
Ethereum network fees fell to their lowest level in more than three years, falling to $2.6 million in a seven-day period, down from $5.1 million four weeks earlier. Part of this decline reflects reduced activity on decentralized exchanges, where volumes fell to $13.4 billion in the same period after peaking at $36.2 billion in August.
Related: Ether Price Analysis – Will ETH Continue to Fall in December?
More worryingly, rival chains Tron and Solana posted a 9% increase in seven-day fees, according to Nansen data. The inactive movement of the Ether kit on Sunday added to the concern of investors. An entity active since Ethereum’s genesis block in 2015 transferred 40,000 ETH to a new address, sparking speculation about a potential sale.
Ethereum’s Fusaka upgrade, scheduled for Wednesday, is an important step towards better scalability and an improved wallet management experience. However, demand for decentralized applications has weakened, resulting in lower fees. Currently, there is limited evidence that ETH is in a position to outperform the broader cryptocurrency market.
This article is for general information purposes and is not intended and should not be considered legal or investment advice. The views, thoughts and opinions expressed herein are solely those of the authors and do not necessarily reflect or represent the views and opinions of Cointelegraph.
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