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Tuesday, December 6, 2022

Ether Derivative Metrics Suggest $1600 ETH Support Lacks Strength

Although data indicates Ether traders are less negative than before, ETH bulls have limited hope despite decreasing gas prices and smart contract deposits.

Since May 3, the price of Ethereum (ETH) has increased by 60%, exceeding the price of Bitcoin (BTC), the most popular cryptocurrency, by 32%. Evidence, however, indicates that the $1,600 support is currently weak due to declining smart contract deposit metrics and network usage. Additionally, the selling pressure on ETH derivatives from margin traders is growing.

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The change of Ethereum to a proof-of-stake (PoS) consensus network, known as the Merge, was largely responsible for the price’s upward movement. Tim Beiko, a developer for ETH core, suggested September 19 as a potential target date for the Merge on the ETH core developers’ conference call on July 14. Additionally, after the network’s monetary policy shift, analysts predict that the new supply of ETH would be limited by up to 90%, acting as a bullish catalyst.

Ether Derivative Metrics Says $1600 ETH Lacks Support: 

The mid-May collapse of Terra’s ecosystem has greatly helped Ethereum’s total value locked (TVL). Due to the ETH network’s strong security and tried-and-true applications, such as MakerDAO (MKR), the project that created the DAI stablecoin, investors switched their decentralized finance (DeFi) investments to it.

According to research from Defi Llama, the ETH network currently owns a 59 share of the market of TVL, up from 51% on May 3. Despite growing in popularity, Ethereum’s current smart contract deposits of $40 billion seem insignificant compared to the $100 billion seen in Dec 2021.

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Trades should look at the derivatives market data for ETH to identify where crypto giants and market makers are situated. In this regard, the 25 percent delta skew is a warning indication anytime experienced traders overcharge for upward or negative protection.

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