Key conclusions:
- While bearish trends in ETH futures and spot ETF outflows signal weak institutional appetite, stake demand is preventing further declines.
- The decline in foreign currency deposits and the accumulation of BitMine show the confidence of owners in the long-term value of ETH.
The price of Ether (ETH) has failed to recapture the $1,700 level over the past week, following broader weakness in cryptocurrency markets. This correction is in sharp contrast to the bullish momentum seen in the US stock market. Traders worry that Ether’s appeal has faded due to sluggish activity on the chain and a distinct lack of demand for bullish leveraged positions.
ETH futures annual funding rate. Source: Laevitas
The ETH perpetual futures annual funding rate turned negative on June 5, meaning short firms are paying premiums to keep their positions open. Bullish traders remain uncomfortable adding risk despite a 30% price correction over the past five weeks. Total open interest in ETH futures also fell significantly, indicating a pullback in institutional activity.
ETH futures aggregate open interest on major exchanges, ETH. Source: CoinGlass
Total exposure to ETH futures fell 30% in a month, hitting a 13-month low. This dwindling institutional appetite is evident in US-listed Ether spot exchange funds, which saw $323 million in net outflows over two weeks.
ETH staking requires a contrast with weak chain activity
Regardless of whether the decline in ETH futures demand can be attributed to record demand for the SpaceX (SPCX US) IPO, the impact on trader sentiment remains negative. Ethereum’s decline in on-chain activity likely fueled this downward trend in the price of ETH.
Ethereum Total Value Locked vs DApp Weekly Revenue, USD. Source: DefiLlama
Total Locked Value (TVL) on the Ethereum network has fallen 33% in two months to $37.5 billion. At the same time, revenue from decentralized applications (DApps) fell 43% in May compared to the previous six months. This reduced on-chain volume is usually associated with lower network fee generation and a drop in ETH utility.
Interestingly, the growing demand for Ethereum staking is in stark contrast to the bearish decline in ETH derivatives. Approval to invest in US listed ETFs and aggressive accumulation with BitMine ( BTMN US ) greatly outperformed outflows during the period, despite a modest 2.7% return.
ETH staking validator queue, ETH. Source: ValidatorQueue
The entry queue for ETH staking validators is currently 50 days, totaling over 2.9 million ETH. In contrast, the output queue has no wait time, which is a major sign of strength, given that 39.5 million ETH are currently invested. While there is no guarantee that stakers will lock up their tokens forever, this metric signals deep confidence in Ethereum’s long-term prospects.
Related: ETH Futures Traders Lean Towards $1.6k Lows: Will Ether Lead Market Recovery?
ETH estimated balance on exchanges, ETH. Source: Glass knot
Meanwhile, ETH deposits in the exchange fell to 15.05 million from 16.15 million three months ago, indicating a large accumulation. This change was driven in part by BitMine, which added 337,078 ETH to its balance in the past 30 days, according to data from CoinGeck.
Ultimately, weak demand for bullish ETH bullion should not be misinterpreted as a sign of growing downside risk. As long as role metrics remain solid and spot ETF outflows remain reasonably limited, the prospect of ETH price falling to $1,500 seems slim.
