Investors generally do not complain about price increases, except when there are serious downside risks on the chart. For example, an analysis of the current ETH (ETH) price chart may lead to the conclusion that the bullish correlation since March 15 is very aggressive.
Ether price of FTX in USD. Source: Trading View
As such, it is natural for traders to fear that losing support of $ 3,340 could lead to a retest of the $ 3,100 level, or a 12 percent decline to $ 3,000. Of course, this largely depends on how the traders are positioned, as well as the performance of the Ethereum network.
First of all, the total value of the Ethereum Network (TVL) peaked at 32.8 million ETH on January 23 and has since fallen by 20%. TVL measures the amount of coins placed on smart contracts, including decentralized finance (DeFi), games, NFT markets, social media, collectibles and high risk.
Furthermore, the average transaction fee on the Ethereum network reached a low of $ 8 on March 16, but recently rose to $ 15. Thus, it must be considered whether this reflects less use of decentralized applications (DApps) or users who benefit from Layer 2 scaling solutions.
Furthermore, the premium for ether in the future is not a cause for concern
Traders should analyze Ether-futures market data to understand how professional traders position themselves. Quarterly contracts are the preferred tool for whales and market makers because they avoid fluctuations in the financing rate of perpetual futures contracts.
The base index measures the difference between long-term futures contracts and current spot market levels. Ethereum futures contracts must have an annual premium of 5% to 12% to compensate traders for holding funds two to three months before the contract expires.
Annual premium on 3-month Ether futures contracts. Source: Laevitas.ch
The current Ether future base of 6% is slightly above the market neutral minimum. The annual premium for futures below 5% is bearish, while figures above 12% indicate an upward trend.
These data tell us that professional traders are far from encouraging, but the base rate has been 4% or less over the past two months, reflecting bearish sentiment. Thus, there was an improvement, but not enough to create attention among buyers.
To rule out external factors that may affect the data for derivatives, you should analyze the data of the Ethereum network on the network. For example, network usage monitoring tells us whether actual usage cases support the demand for Ether.
Chains on the chain cause concern
Measuring the number of active addresses on a network provides a fast and reliable measure of efficiency. Of course, this calculation may be misleading due to the increasing use of Tier 2 solutions, but it serves as a starting point.
Average number of active addresses in Ethereum over 7 days. Source: CoinMetrics
The 593,260 active addresses per day are up 2% over 30 days, but that is far from the 857,520 seen in May 2021. The data show that Ether-token transactions show no signs of growth, at least on the basic the level.
Traders should turn to calculations for DApp use, but not just focus on TVL because this calculation focuses strongly on decentralized lending and exchanges (DEX), so measuring the number of active addresses provides a broader view.
DApps activity on the Ethereum network for 30 days. Source: DappRadar
In Ethereum DApps, the number of active addresses is reduced by an average of 11% per month. Overall, the data is disappointing as the smart contract network is specifically designed to host decentralized applications.
In comparison, DApps on the Polygon network grew by 12% and Solana (SOL) by 6%. Unless there is a decent increase in Ether transactions and DApp usage, the daily close support of $ 3,340 is likely to expire.
The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph. Every investment and trading movement involves risk. You should do research when making a decision.