Data on the Ethereum chain shows another drop in ETH prices
Chart analysis of the current price of Ether (ETH) paints a bearish picture, largely justified by its 11% decline over the past month, but other traditional financial assets have faced more extreme price adjustments over the same period. ETF Invesco China Technology ($CQQ) lost 31% and Russell 2000 lost 8%. At the moment, traders are concerned that the loss of the downlink support at $2,850 could result in a sharp drop in price, but this is highly dependent on how derivatives traders are positioned on-chain along with the Ethereum network. According to Defi Llama, the total value of the Ethereum (TVL) network has reached 27 million ether in the last 30 days. TVL measures the number of coins stored in smart contracts, including decentralized finance (DeFi), NFT markets, high-stakes games and applications. The average Ethereum transaction fee has increased to $13 after hitting $1.50 on April 20, but it remains to be seen whether this reflects a reduction in the use of decentralized applications (DApps) or only users benefiting from the scaling of the layer 2 solution. Ether futures premium is trending bearish Traders use data from the ether futures market to understand how professional traders position themselves, but unlike standard perpetual futures contracts, quarterly contracts are preferred by whales and market makers because they can avoid changes in funding levels. The basic indicator measures the difference between a long-term futures contract and the current spot market rate. In a neutral market, the annual premium for ether futures should range from 5% to 12% to compensate the trader for “locking in” money until the contract expires. Ether futures’ current base of 2% clearly indicates a lack of demand from leveraged buyers. While not an inverse price (negative premium), an annual futures premium of less than 5% is usually seen as a sword. This data tells us that professional traders have been neutral over the past few months, but to rule out external factors that might influence the derivatives data, we need to analyze the data on the Ethereum chain. For example, monitoring network usage tells us whether actual usage supports Ether requests. Indicator in slow chain Measuring the number of active addresses on a network provides a fast and reliable indicator of their efficient use. Of course, this indicator can be misled by improving layer 2 decision making, but it serves as a starting point. Currently 584,477 daily active addresses are on average 4% lower than 30 days ago and nearly 675,117 as of November 2021. Thus, the data shows that Ether token transactions are showing no signs of growth, at least at the primary level. Traders should rely on indicators for DApp usage but avoid focusing exclusively on TVL as this indicator is heavily focused on DeFi applications. Measuring the number of active addresses provides a broader view. Ethereum DApps active addresses have decreased over the past 30 days. Overall, the data is a bit disappointing, with competing networks like Solana seeing a 34% increase in active addresses. Unless there is a decent increase in Ether trading and DApp usage, the $2850 downlink support channel resistance may not hold and trigger a deeper near-term price adjustment.