Ethereum price holds above $3K but network data suggests bulls may get trapped

When analyzing Ether's (ETH) terms chart, 1 could reason that the 3-month agelong bearish inclination has been breached for a fewer reasons. The existent $3,100 terms scope represents a 43% betterment successful 15 days and, much importantly, the descending transmission absorption was ruptured connected Feb. 7. 

Should Ether bulls commencement celebrating and calling for $4,000 and higher? That mostly depends connected however retail traders are positioned, on with the Ethereum network's on-chain metrics. For instance, is the $30-plus transaction interest impacting the usage of decentralized applications (dApps), oregon are determination immoderate different factors that volition prohibit Ether's terms growth?

Ether (ETH) terms astatine FTX, successful USD. Source: TradingView

Since the 55.6% correction from the $4,870 all-time precocious to the rhythm bottommost astatine $2,160 connected Jan. 24, Bitcoin (BTC) has failed to interruption the $45,500 absorption and traders concluded that a 12% correction was the astir apt scenario.

On a brighter note, connected Feb. 7, Big Four auditor KPMG's Canadian wing announced the summation of Bitcoin and Ether to its firm treasury. The determination reflects KPMG Canada's content that cryptocurrencies are a "maturing plus class," according to Benjie Thomas, a managing spouse for the firm.

Derivatives information tells a antithetic story

To recognize however assured traders are astir Ether's terms recovery, 1 should analyse the perpetual contracts futures data. This instrumentality is the retail traders' preferred marketplace due to the fact that its terms tends to way the regular spot markets.

In immoderate futures declaration trade, longs (buyers) and shorts (sellers) are matched astatine each times, but their usage of leverage varies. Consequently, exchanges volition complaint a backing complaint to whichever broadside demands much leverage, and this interest is paid to the opposing side.

Ether perpetual futures 8-hour backing rate. Source: Coinglass

This indicator volition archer america whether retail traders are getting excited, which would origin it to determination supra 0.05%, equivalent to 1% per week. Notice however the past mates of months showed a somewhat antagonistic backing rate, reflecting the bearish sentiment. Currently, determination is nary motion that retail traders are assured capable to reopen leveraged agelong positions.

One should analyse the Ethereum network's on-chain information to recognize if the deficiency of assurance is circumstantial to leverage trading. For example, adjacent though determination is nary acceptable narration betwixt Ether's terms and web use, debased transaction measurement and a diminution successful progressive users could beryllium a interest if decoupled from a terms hike.

On-chain metrics rise concern

Measuring the monetary worth of the ETH transacted connected the web provides a reliable indicator of effectual use. Of course, this metric could beryllium masqueraded by expanding adoption successful layer-2 solutions but it remains a starting point.

Sum of autochthonal token units transferred per day. Source: CoinMetrics

The existent $6.2 cardinal regular transaction mean is simply a 55% driblet from December's highest and not truly acold from the 1-year debased astatine $5.6 billion. Thus, it is harmless to reason that Ether token usage is not showing signs of growth, astatine slightest connected the superior layer.

Analysts should besides cheque decentralized applications usage metrics. One indispensable retrieve that the Total Value Locked (TVL) is heavy concentrated connected lending platforms and decentralized exchanges (DEX). Consequently, gauging the fig of progressive addresses provides a broader view.

Ethereum web 30-day dApps activity. Source: DappRadar

Apart from the non-fungible token (NFT) marketplace Opensea, Ethereum dApps saw a monthly 28% alteration successful the fig of progressive addresses. In a nutshell, that is disappointing usage information due to the fact that the astute declaration web was specifically designed to big decentralized applications.

Unless there's an uptick successful Ether transactions and dApps usage metrics, investors volition construe immoderate Ether terms determination supra $3,000 arsenic a imaginable bull trap. As for retail traders' neutral backing rate, it mightiness arsenic good beryllium a bullish motion that the capitalist people typically enters agelong leverage positions aft a beardown rally.

The views and opinions expressed present are solely those of the author and bash not needfully bespeak the views of Cointelegraph. Every concern and trading determination involves risk. You should behaviour your ain probe erstwhile making a decision.