The price of Ethereum (ETH) is facing significant resistance at the $1,920 level after a recent 17.5% rally between June 15 and June 22. Several factors contribute to the limited upside potential, including unfavorable macroeconomic conditions, regulatory uncertainties in the cryptocurrency space, and a decline in demand for decentralized applications (DApps) on the Ethereum network.
The macroeconomic environment poses headwinds for ETH price. A federal judge’s denial of Binance’s motion to prevent the U.S. Securities and Exchange Commission (SEC) from making public statements related to the case has added to the regulatory uncertainty. Additionally, HSBC Asset Management’s midyear outlook warns of an economic downturn in the United States, followed by a European recession, which may impact market sentiment. Furthermore, IMF Chief Economist Gita Gopinath suggests that central bankers should maintain high interest rates for longer than expected, potentially affecting investor sentiment towards cryptocurrencies like Ethereum.
DApp usage on the Ethereum network has failed to gain momentum, with gas fees dropping by 60%. The average transaction cost decreased from $9 to $3.7 over four weeks, accompanied by a 27% decline in active addresses using DApps. While Uniswap and MetaMask Swap experienced a decline in activity, non-fungible token (NFT) marketplaces such as OpenSea, Blur, Manifold, LooksRare, and Unick saw increased user adoption.
Moreover, the total value locked (TVL) in Ethereum’s smart contracts reached its lowest level since August 2020, decreasing by 6.9% between April and June 2023, according to DefiLlama. This decline in TVL indicates reduced confidence and usage of Ethereum’s decentralized finance ecosystem.
Examining the derivatives market, professional traders appear cautious about leveraged long positions as reflected by the futures premium (basis indicator), which remains below the neutral 5% threshold. Similarly, the 25% delta skew indicator for options trading suggests moderate optimism but lacks sustained positive sentiment.
Considering these factors, the resistance below $2,000 appears formidable for Ethereum bulls. The combination of weakening derivatives metrics, declining DApp usage, and macroeconomic challenges places the odds in favor of Ethereum bears successfully defending the $1,920 resistance level. While this doesn’t necessarily imply a retest of $1,750, it does indicate significant hurdles for ETH bulls in the short term.
It is essential to note that this article provides general information and should not be considered legal or investment advice. The author’s opinions do not reflect those of Cointelegraph.
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