Ethereum’s price is currently hovering just above the $2,900 mark, indicating a 9.8% loss for the week. On-chain metrics reveal the reasons behind Ethereum’s lackluster performance.
Compared to the broader altcoin market, Ethereum is underperforming. The altcoin market had a positive start to May 2024, with over $150 billion in capital inflows in the first week. However, since May 7, the market rally has slowed down, and bears have reclaimed most of the gains from the first week of May.
Ethereum’s bearish pressure seems to be more intense than the average market. TradingView’s TOTAL2 metric, which tracks the total market cap of all listed cryptocurrencies excluding Bitcoin, shows that the global altcoin market declined by $73.3 billion between May 6 and May 11, a 6.9% decrease. In comparison, Ethereum’s price declined by 9.8% during the same period, performing below the market average. This underwhelming performance can be attributed to negative sentiment and delays in Ethereum ETF approval in the US.
Although Hong Kong approved spot ETH ETFs for trading in early May, raising hopes for the US SEC to follow suit, the lower volumes in Hong Kong compared to the US market have not had a significant impact. Furthermore, Grayscale, the largest Digital Assets Manager in the US, recently withdrew its Ethereum ETF application, further dampening the prospects of approval in 2024.
On-chain data suggests that speculative traders are taking a bearish stance on Ethereum. The decline in the ETH open interest ratio since mid-April has negatively affected the price. Historical data shows that when the open interest ratio falls below 0.2%, the ETH price has struggled to stay above $3,000. The current open interest ratio is at 0.18% on May 10, indicating pessimism among traders regarding Ethereum’s short-term price prospects.
At the time of writing, Ethereum is trading at $2,910, down 9.8% for the week. The decline in open interest relative to spot market activity makes it unlikely for Ethereum to break above $3,100 in the near term. However, there is a support cluster at $2,850, which could prevent a breakdown below that level and lead to a potential rebound.
In conclusion, the decline in the open interest ratio is expected to slow down Ethereum’s price movements. Therefore, it is likely that Ethereum’s price action over the weekend will remain within the narrow range of $2,800 to $3,100.
Disclaimer: This article is for informational purposes only and should not be considered financial advice. The views expressed in this article are the author’s personal opinions and do not reflect the opinion of The Crypto Basic. Readers should conduct their own research before making any investment decisions. The Crypto Basic is not responsible for any financial losses.
