Ethereum Shorts On The Rise, ETH Price Tests Crucial support At $3,000

The world’s second-largest cryptocurrency Ethereum (ETH) has once again come under strong selling pressure a day after Hong Kong announced the launch of spot Ethereum ETFs. As of press time, the Ethereum (ETH) price is trading 4.53% down trying to find some support around the $3,000 level.

Ethereum Short Positions Rising

In a recent market analysis provided by QCP Capital, two key points highlight the current sentiment surrounding Ethereum (ETH):

1. Ethereum risk reversals have taken a sharp turn towards negativity, particularly in the front-end, registering at -12%. This shift indicates a notable level of nervous sentiment among investors and traders regarding the future direction of ETH prices.
2. Additionally, the market is currently short on Ethereum gamma, particularly in near-dated options. This positioning suggests that any significant movement in ETH prices, whether upwards or downwards, could potentially be amplified due to the existing market dynamics.

These observations underscore the cautious stance prevailing in the Ethereum market. Despite the rising short positions in Ethereum, the discussion rates surrounding it have been on the rise. Currently, Ethereum is witnessing the fastest surge in discussion rates, as reported by on-chain data provider Santiment.

The ETH/BTC Pair Shows Weakness

According to a recent report by Grayscale Research, Ethereum’s native token Ether (ETH) has shown a performance lag behind Bitcoin (BTC) by approximately six percentage points since the peak in mid-March for cryptocurrency markets. Moreover, over the last three months, the BTC price surged by 56% while the ETH price lagged with 28% gains.

The current ETH/BTC ratio is hovering around 0.048 BTC similar to what it was in May 2021. The last time this happened, the Ethereum price experienced two consecutive months of decline.

The disparity in performance between ETH and BTC is attributed to several factors. While Bitcoin dominates the Currencies Crypto Sector, Ethereum faces substantial competition within the Smart Contract Platforms Crypto Sector.

Additionally, despite a notable increase in active users within the ETH ecosystem this year, the network’s fee revenue has not experienced a proportionate rise. This is primarily because new activity is predominantly occurring on Layer 2 chains and sidechains instead of the Ethereum mainnet.

Furthermore, Ethereum’s perceived odds of obtaining approval for a spot ETF have diminished, which may have contributed to its underperformance. According to Polymarket, a decentralized prediction platform, consensus expectations for spot ETH ETF approval have declined by approximately 20% since January, now standing at around 60%. A decision from the SEC regarding approval or denial of a spot ETH ETF is likely by the month-end of May 2024.

ETH Price Action

Currently, on the technical charts, the ETH price has been consolidating in the falling wedge pattern. A breakout on the upside above the $3,750 level could signal the opening of the long position. On the other hand, given the persistent downturn in the overall market, the Ethereum price might extend its decline below the crucial 100-day Simple Moving Average (SMA) level at $3,023. A candlestick closure below $2,750 would negate the optimistic outlook.