3 reasons why Ethereum price could struggle at the $1.9K level

Since May 12, Ether (ETH) terms has been struggling to prolong its $1,800 enactment level arsenic investors look pressures from a worsening crypto regulatory situation and the Ethereum network’s precocious state fees. Also negatively impacting Ether’s terms are 3 indicators signaling reduced request for its decentralized applications (DApps) and a deficiency of leverage buying request from nonrecreational traders.

Regulators awesome their program to further bounds crypto intermediaries

According to tribunal documents filed connected May 15, the U.S. Securities Exchange Commission (SEC) has fixed a ceremonial effect successful tribunal successful narration to Coinbase’s petition for wide crypto regulation. The SEC stated that immoderate rulemaking whitethorn instrumentality years and that enforcement actions volition proceed successful the meantime.

On May 16, the Economic and Financial Affairs Council of the European Union — comprising concern ministers of each subordinate states — approved the highly-anticipated Markets successful Crypto-Assets (MiCA) regulation, which volition travel into effect by mid-2024.

Some reason that the MiCA facilitates businesses maturation successful the region, portion others absorption connected the privateness risks for idiosyncratic users’ data, and the risks imposed for non-custodial solutions, including decentralized concern (DeFi) applications.

The driblet successful DApp deposits is concerning

The Ethereum web is experiencing problems caused by surging state fees, the outgo associated with transactions, including those performed by astute contracts. For the past 4 weeks, the mean transaction interest has stood supra $9, which severely constricted the request for DApp usage.

Total deposits connected the Ethereum web successful Ether presumption plunged to their lowest levels since August 2020. Such an investigation excludes the effects of autochthonal Ethereum staking, which precocious started to let withdrawals.

Ethereum web applications' full deposits successful ETH. Source: DefiLlama

According to DefiLlama data, Ethereum DApps reached 14.9 cardinal ETH successful full worth locked (TVL) connected May 16. That compares with 16.5 cardinal ETH 2 months prior, a 10% decline. As a comparison, TVL connected BNB Smart Chain successful BNB presumption was fundamentally level successful the aforesaid period, portion Polygon network’s (MATIC) deposits accrued by 29%.

BNB Smart Chain attempts to instrumentality a pb successful DEX volume

Ethereum mightiness person been the implicit person successful DEX volumes since inception, but this presumption is being challenged. Ethereum’s marketplace stock by measurement connected decentralized exchanges (DEXs) peaked astatine 75% successful the week ending March 5 but steadily declined to its lowest level ever, astatine 39.6% successful the week ending May 14.

Weekly DEX measurement by chain. Source: DefiLlama

Gainers connected DEX trading volumes were Arbitrum, expanding to 14% from 7%, and BNB Smart Chain, increasing to 31% from 5.6% since March 5. One mightiness reason that the occurrence of the Ethereum network’s scaling solutions reflects bullishness for Ether’s price, but that narration is not truthful direct.

Related: Updated European taxation directive requires reporting connected each crypto plus transfers

Data shows pro traders turning bearish

Ether quarterly futures are fashionable among whales and arbitrage desks. However, these fixed-month contracts typically commercialized astatine a flimsy premium to spot markets, indicating that sellers are asking for much wealth to hold settlement.

As a result, ETH futures contracts successful steadfast markets should commercialized astatine a 5 to 10% annualized premium — a concern known arsenic contango, which is not unsocial to crypto markets.

Ether 3-month futures annualized premium. Source: Laevitas

Ether nonrecreational traders person avoided leverage longs (bullish bets) since aboriginal April. Moreover, the existent 1% ETH futures premium is connected the borderline of becoming negative, known arsenic backwardation — if confirmed, this is an alarming reddish emblem arsenic bearish request dominates the scene.

In short, those 3 indicators awesome the $1,900 absorption volition beryllium hard to interruption successful the short-term, namely the reduced TVL, record-low DEX marketplace share, and deficiency of leverage buying demand. For now, Ether bears are successful control, favoring the likelihood of a terms correction.

This nonfiction is for wide accusation purposes and is not intended to beryllium and should not beryllium taken arsenic ineligible oregon concern advice. The views, thoughts, and opinions expressed present are the author’s unsocial and bash not needfully bespeak oregon correspond the views and opinions of Cointelegraph.

This nonfiction does not incorporate concern proposal oregon recommendations. Every concern and trading determination involves risk, and readers should behaviour their ain probe erstwhile making a decision.