This is an old saying in traditional markets that actually resembles a trading rule. “When the trend is negative, you can just stay neutral or go short,” she says, and believes in betting on a lower price. The problem is that a bounce correction deceives traders into believing that the prevailing negative sentiment has moved into the buying market.
For example, after analyzing the ETH (ETH) price chart, we can conclude that after a 41% collapse, a bullish wave should flare up sooner rather than later. Unfortunately, this is a bit of a misnomer because markets can exist indefinitely (trend direction).
Ether price on FTX in USD. Source: Trading View
Thus, it can be said that the chart above shows a long period of trading in a range, for example, around $2,800. Given Ether’s 88% annual volatility, a move between $2,400 and $3,200 should be considered normal.
Using technical analysis, a trader can point to lower peaks that form a downtrend channel above, but should the bears celebrate on Ether and call $2,500 or below? Much of this depends on how retailers are positioned, much like the network settlement of the Ethereum network.
A few points to note: Is the 63% reduction in network transaction fees to $17 currently a reduction in the use of DApps, or do users benefit from working with other Tier 2 scaling solutions?
No Ether futures premium
To understand how safe traders are when Ethereum price recovers, it is necessary to analyze data on perpetual futures. It is the preferred derivative for retailers because the stock exchanges offer up to 50x influence. The price tends to perfectly follow the regular spot markets.
In any futures trading, long (buyers) and short (sellers) positions are always the same, but the use of influence can vary. Thus, the stock exchanges will require a funding rate for the party that deposits the lower margin, and this commission is paid to the other party.
8-hour funding rate for Ethereum perpetual futures. Source: Coinglass
This data tells us whether retailers are excited about the fundraising rate rising above 0.05%, or 1% per week. Note that the last two months have shown a slightly negative funding rate, reflecting a neutral to bearish trend. There is currently no evidence that retailers are confident enough to buy ETH using influence.
To exclude external factors that could affect the derived data, you should analyze the Ethereum network data in the chain. For example, network usage monitoring tells us whether actual use cases support demand for Ether tokens.
The scales on the chain are disturbing
Measuring the monetary value of Ether transactions on the network provides a quick and reliable indication of its effective use. Of course, this scale can be masked by overdependence in Level 2 decisions, but it serves as a starting point.
Average number of initial transfers of ETH tokens per day over 7 days in USD. Source: CoinMetrics
The current average daily transaction is $6.7 billion, up 6% from 30 days ago, but not close to $9 billion at the end of 2021. The data shows that Ether token transactions show no signs of growth, at least at a basic level. .
Calculations for using decentralized applications should be addressed, but exclusive attention to the total value locked (TVL) should be avoided, since this calculation is heavily focused on decentralized lending and exchange (DEX) platforms, so measuring the number of active addresses provides a broader view.
DApps activity on the Ethereum network for 30 days. Source: DappRadar
On average, Ethereum DApps saw a 10% monthly decline in active addresses. In short, the data is disappointing because the smart contract network is specifically designed to host decentralized applications such as non-performing token (NFT) markets and decentralized finance or DeFi.
Unless there is a decent increase in Ethereum transactions and DApps usage, the bears will likely take over. As for the neutral financing price for retailers, it should not be considered a bearish signal, as these investors usually go into long-term positions after a strong rise in prices.