The increase in Ethereum network activity fuels the momentum, however trading ether futures with excessive leverage carries danger.
In the past 30 days, the price of ether has increased by 58%, outpacing the overall cryptocurrency market by 14%.
Even if it was unable to maintain levels above $4,000, Ether reached its best price in more than two years at that time, narrowing the difference with the market leader, Bitcoin.
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Some traders claim that the spot Ethereum exchange-traded fund (ETF) decision has been the only factor in Ether’s bull run.
If this is true, at least in the early going, there may be a “sell the news” opportunity if the event is completely priced in.
By May 23, the U.S. Securities and Exchange Commission is anticipated to render a final decision on the issue; Bloomberg analysts estimate that the commission will approve the proposal 35% of the time.
The recent price increases have also been attributed to other issues, such as the March 13 Dencun network update.
“The hard fork aims to slash Ethereum’s transaction fees, addressing a persistent network challenge.”
In particular, since November 2023, the seven-day average Ethereum transaction cost has been around $4 or above.
Critics of Ether contend that while Bitcoin hit a record high on March 12, Ether is still 19% behind its top of $4,870 in November 2021.
Nonetheless, Ether is now valued at $480 billion, placing it above ExxonMobil and UnitedHealth in the top 20 globally tradable assets.
To put things in perspective, those businesses reported $22.4 billion and $36 billion in earnings within the course of a year.
When engaging in the network’s proof-of-stake consensus, ether investors earn 4%, but the demand for ETH is mostly dependent on the ecosystem’s activity.
Growth in the Ethereum ecosystem, whether it be on the second layer or not, is good for the price of ether because ETH is needed for base layer transaction processing and validation in addition to providing collateral for some DApps.
The dominance of the Ethereum network is evident from the most recent data, particularly when layer-2 solutions are taken into account.
Furthermore, the volume of the Ethereum foundation layer has increased, with close to 590,000 active addresses, even during times when transaction costs were $20 or more.
However, a more detailed perspective is necessary to determine whether airdrops or other variables that may have fueled the short-term demand caused the increase to be limited to a few projects.
Data indicates steady development for the main aggregators and decentralised exchanges (DEX), while the nonfungible token marketplaces were a little let down.
In summary, the tenth-largest DApp, ParaSwap, showed only 7,100 active addresses in the last week, indicating that the Ethereum network usage is not very promising.
In contrast, Jumper Exchange, the tenth-largest DApp on BNB Chain, had 36,500 active addresses during that time.
Analysis of the Ether futures is necessary to determine whether or if expert traders are doubtful that Ether will switch $4,000 into support.
To reflect their longer settlement duration, monthly futures contracts should trade 5% to 10% higher in neutral markets than normal spot markets.
On March 11, the Ether annualised futures premium – also known as the basis rate – rose to a level not seen in more than 18 months.
Levels above 25% usually signify overconfidence, but they don’t always mean there is an immediate risk because traders might look for other ways to fund their positions when the right chance presents itself.
In a similar vein, the large premium draws arbitrage buyers who are prepared to simultaneously purchase spot ETH and short the futures, thereby medium-term stabilising the market.
Ultimately, the longer it takes for Ether to break over $4,000 while the futures premium is still substantial, the greater the chance of a sell-off, regardless of how confident professional traders are.
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