Author: Marcel Pechman, CoinTelegraph; Translated by: Deng Tong, Golden Finance
Between July 1 and July 8, ETH prices fell 18% to $2,826, but have since recovered. Investors are understandably disappointed, especially since $313 million in leveraged long positions were liquidated during this period. Although the current price of $3,100 is still below the previous support level of $3,400, on-chain and derivatives indicators suggest that Ethereum traders are gradually regaining confidence.
Ethereum supply on exchanges continues to decline
Even if the launch of a spot Ethereum exchange-traded fund (ETF) in the U.S. takes longer than expected, strong fundamentals suggest that prices could rebound soon. U.S. Securities and Exchange Commission Chairman Gary Gensler recently said he expects approval of the S-1 filing to be “sometime in the summer,” meaning before the end of September. However, the exact timeline remains uncertain, giving traders reason to maintain a degree of skepticism.
With similar spot Bitcoin ETFs seeing inflows of $654 million in the past three days, excitement about the eventual launch is growing. Bitwise Chief Investment Officer Matt Hougan said a spot Ethereum ETF could attract as much as $15 billion in inflows in the first 18 months of trading. Even if this estimate is off by 50%, analysts believe that Ethereum’s price will benefit from a portion of the supply locked in staking and decentralized applications (DApps).
Source: Leon Waidmann
Onchain analyst Leon Waidmann noted that 40% of Ether supply is locked, accounting for staking and DApps, while the supply on exchanges has decreased over the past month. Glassnode data shows that deposits on exchanges fell to 12.21 million ETH from 13.34 million ETH two months ago. Generally speaking, a decrease in the number of tokens available for immediate trading indicates that investors are less likely to sell in the short term.
The Ethereum network’s total value locked (TVL), which measures the total deposits in its DApp ecosystem (including Layer 2 bridges), remained stable at 17.7 million ETH, the same as a month ago. Considering that Ethereum’s average transaction fee is over $2, significantly higher than many competitors such as Solana (SOL) and BNB Chain (BNB), these data support the view that fiat exchange liquidity has decreased and is showing resilience.
Growth of Ethereum Layer 2 activity and a resilient ETH derivatives market
Investors looking for lower fees have benefited from Ethereum’s Layer 2 solution, which has seen significant growth in activity over the past month.
Top blockchains by 30-day DApps transaction volume (in USD). Source: DappRadar
In the past 30 days, Ethereum DApps have seen $200.9 billion in transaction volume, but its Layer 2 ecosystem has expanded significantly. For example, Arbitrum's transaction volume soared to $52.4 billion, an increase of 94%, while Blast grew 62% to $51.1 billion and Base grew 57% to $18.4 billion. In contrast, direct competitors such as BNB Chain and Solana have seen an average decline of 27% in the same period.
Even as ETH traded to its lowest level in nearly three months on July 8, Ether derivatives showed no enthusiasm from short sellers. Demand for call (buy) options was twice that of put (sell) options, suggesting that there was no increase in volume for neutral to bearish strategies using ETH options.
Deribit's ETH options put/call volume ratio. Source: Laevitas.ch
Data shows that on July 8, ETH put option trading volume rose slightly to 0.8, which means that the trading volume of ETH put options was 20% smaller than that of call options. However, the indicator quickly recovered to around the 7-day average of 0.55, and call option trading volume increased by 85%. Both derivatives and on-chain indicators support bullish momentum, while the reduction in the amount of ETH available for trading on fiat exchanges also supports the price to break through the $3,400 resistance level in the short term.
