A key Ethereum price metric hits a 6 month low as ETH falls below $3K

ETH price has been in a downtrend for 3 months, and derivatives data shows pro traders are almost ready to throw in the towel.

Ether (ETH) price lost the $3,600 support on Jan. 5 as minutes from the Federal Reserve’s December FOMC meeting showed that the regulator was committed to decreasing its balance sheet and increasing interest rates in 2022.

Even with that looming overhead, Ether has problems of its own, more specifically, the ongoing $40 and higher average transaction fees. On Jan. 3 Vitalik Buterin said that Ethereum needs to be more lightweight in terms of blockchain data so that more people can manage and use it.

The concerning part of Vitalik’s interview was the status of the Ethereum 2.0 upgrade, which is merely halfway implemented after six years. The subsequent roadmap phases include the “merge” and “surge” phases, followed by “full sharding implementation.” When implemented, they will lead to an 80% estimated completion of the network upgrade, according to Buterin.

For those analyzing Ether’s performance over the past 3 months, the current pricing seems appealing because the cryptocurrency is currently down 34% from its $4,870 all-time high. However, this short-sighted view disregards the 560% gain Ether had accrued up till Nov. 10, 2021.

Furthermore, the network’s adjusted total value locked (TVL) has dropped by 17% since Ether’s price peak.

As shown above, the network’s TVL dropped from $166 billion to the current $138 billion. Meanwhile, competing smart contract networks like Terra saw their TVL increase from $11 billion to $18.7 billion. Fantom also increased the value locked on its smart contracts from $5 billion to $9 billion.

Due to network upgrade delays, worsening macroeconomic conditions and a 3-month long price correction, professional traders are clearly becoming frustrated and anxious.

Ether futures are at the edge of turning bearish

Quarterly futures are usually the preferred instruments of whales and arbitrage desks due to their settlement date and the price difference from spot markets. However, the contract’s biggest advantage is the lack of a fluctuating funding rate.

These fixed-month contracts usually trade at a slight premium to spot markets, indicating that sellers request more money to withhold settlement longer. Therefore, futures should trade at a 5% to 15% annualized premium in healthy markets. This situation is technically defined as “contango” and is not exclusive to crypto markets.

As displayed above, Ether’s futures contracts premium has come down from 20% on Oct. 21 to a meager 5.5%, just slightly above the neutral market threshold. Although the basis indicator remains positive, it reached the lowest level in 6 months.

The crash below $3,000 on Jan. 10 was enough to drain any bullish sentiment and more importantly, the Ethereum network’s high fees and delayed upgrades might have scared away some investors.

Currently, data shows little sign that bears are ready to take the helm. If this was the case, the Ether futures premium would have turned negative.

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk. You should conduct your own research when making a decision.