3 Key Metrics Suggest Resistance at $1,750 for Ether’s Price

Ether’s price is facing potential downward pressure, with a projected decline to around $1,560. The cryptocurrency experienced a 7% drop between June 14 and June 15, reaching its lowest point in three months. This unexpected dip has shaken investor confidence in Ether’s ability to sustain its climb toward the $2,000 mark.

It’s worth noting that the recent bottom at $1,620 still places Ether’s market capitalization at an impressive $196 billion, surpassing PetroChina’s $186 billion and coming close to chipmaker AMD’s $198 billion.

Considering Ether’s status as the 66th largest tradable asset worldwide, its achievements are significant, especially given its relatively young age of only eight years. Unlike securities, Ether doesn’t generate direct profits for its project’s maintenance. This recent price drop should be a cause for concern among investors.

Regulatory Pressure and Decreased Network Activity Weigh on Ether’s Price

Ether’s price has been negatively impacted by regulatory pressure, which has dampened investor enthusiasm. The Securities and Exchange Commission’s proposed rule change regarding the definition of an exchange has contributed to this decline. Paul Grewal, chief legal officer of Coinbase, has criticized the proposed change, citing a violation of the Administrative Procedure Act.

Additionally, despite a significant decrease of 75% in gas fees, DApp usage on the Ethereum network failed to gain traction. On June 14, the average transaction cost dropped to $4 from $16 one month earlier. Simultaneously, DApp active addresses experienced an 18% decline during the same period.

This downward trend has impacted multiple sectors, including decentralized finance, nonfungible token (NFT) marketplaces, gaming, and collectibles. It is worth noting that the total value locked (TVL), which quantifies the funds locked in Ethereum’s smart contracts, experienced a slight decline of only 2% from mid-May, amounting to 14.6 million ETH, as reported by DefiLlama.

Analyzing the Possibility of Ether’s Price Dropping to $1,650

To assess the likelihood of Ether’s price breaking below the $1,650 support level, it’s essential to consider the reduced ETH futures premium and increased costs of protective put options.

ETH quarterly futures are popular among whales and arbitrage desks. Typically, these fixed-month contracts trade at a slight premium compared to spot markets, indicating that sellers demand higher prices to delay settlement.

In a healthy market, ETH futures contracts should trade at a 5% to 10% annualized premium, a situation known as contango, which is not unique to crypto markets. However, the futures premium, known as the basic indicator, suggests that professional traders have been avoiding leveraged longs. Although the indicator has improved modestly to 2%, it remains far from the neutral 5% threshold.

To eliminate external factors that may have exclusively affected Ether futures, it is crucial to analyze the ETH options markets. The 25% delta skew indicator, which compares call and put options, turns positive when fear dominates the market, as protective put option premiums exceed those of call options.

Ether’s price appears poised for a potential drop to $1,560

Investors often focus on short-term price fluctuations and overlook the fact that Ether has experienced a 37% increase year-to-date in 2023. Additionally, relying too heavily on Ethereum’s $24 billion TVL may cause traders to overlook the signals of declining demand for DApp usage.

Currently, the bearish sentiment prevails based on ETH derivatives metrics, making a retest of the $1,560 support level the most likely outcome. However, this doesn’t imply that the gains made in 2023 are at risk. Until regulatory fear, uncertainty, and doubt dissipate, it will be challenging for bulls to push Ether’s price above the $1,750 resistance level.