Ethereum price has been unable to hold above $3,900 despite repeated attempts over the past seven days. The market expected ETH prices to be boosted by the US Securities and Exchange Commission's (SEC) approval of the Ethereum ETF, as ETH rose on May 21, two days before the close.
Ethereum Spot ETF Approval: Not All Expectations Met
It can be said that Ethereum Spot ETF traders are still waiting for approval.Form S-1 For each fund Eric Balsunas A senior ETF analyst at Bloomberg expects Ethereum spot instruments to begin trading by July 4. James Seifert His colleague noted in BlackRock's updated S-1 on May 29 that “Issuers and SEC are working to introduce Ethereum spot ETFs.”
However, analysts point out that ETH prices may face pressure Grayscale Ethereum Trust (ETHE) In the weeks following the ETF transition, Grayscale's Bitcoin (GBTC) fund had a similar problem due to high fees. Some estimate that grayscale ETHE's capitalization alone will exceed $100 million per day in the first week. This will offset or exceed cash inflows from new entrants.
Essentially part of Ethereum's failure to break through resistance at $3,900 is due to the pre-approval bullishness of spot ETFs, as disappointment that trading will take too long creates uncertainty and has a negative impact on prices. This could pose a problem as Ethereum futures open interest hit a record high on May 28.
$16.8 billion in Ether futures puts liquidation at risk
“Open interest” is a measure of the volume of all ETH futures contracts on various derivatives markets such as Finance, CME, OKX and Pybit.
Where long and short positions are applicable at all times. But an increase in overall contract value means the risk of being forced to close an exponentially larger number of positions. For example, if long holders use 10x leverage, those contracts will be closed if the price of Ether drops by 10%.
On the other hand, if the price of Ether rises sharply by 10% and short position holders use more leverage, the market will automatically buy ETH futures to reduce risk and close the positions without the necessary margin rose to 16.8, a risk factor for billions of dollars of potential buyers in the Ether futures market. And this may be the reason why the price of ETH has yet to rise above $3,900.
Competing networks will outpace the growth of activity on the Ethereum network.
Ethereum's high gas fees may also reflect strong demand for the network. But this opens up opportunities for competing blockchains that offer scalability, which has led to migration to Ethereum's layer-2 solution, but many users and projects opt for alternatives such as BNB Chain, Solana or Optos.
Predictions that all types of DApps will require the same level of decentralization as Ethereum may not match reality. Users who want to run DeFi, gaming or gambling DApps don't want to use a bridge solution to reduce fees, so the slower growth of transaction volume on Ethereum's mainnet than its competitors could be a missed business opportunity.
Ethereum's 122,350 daily active addresses participating with DApps (UAW) were down 2% on May 30 compared to the previous day. Similarly, the total volume transacted on the Ethereum network increased by just 2% during the same period. This data shows that Ethereum has strong fundamentals. There are many DApp use cases and many investor profiles but there is a tendency to adopt alternative blockchains.
For example, the BNB chain's 508,610 daily active addresses are four times more than Ethereum's. These users have transacted more than $3.5 billion on PancakeSwap in the past seven days, while Ethereum's on-chain metrics do not collect more than 226,350 concurrently active addresses, limiting Ethereum's potential.
Source: cointelegraph
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