Top 2 Ethereum Price Indicators suggest traders will struggle to maintain $ 2K support level

Top 2 Ethereum Price Indicators suggest traders will struggle to maintain $ 2K support level – Mail Bonus

The Ether (ETH) price has been trying to establish a rising trend since the May 12 market crash that sent its price to $ 1,790. Altcoin currently supports $ 2,000, but a strong correlation with the traditional market makes traders very skeptical about the recovery of the cryptocurrency market.

Ether / USD 4 hour price on Bitstamp. Source: TradingView

To date, the Central Bank has continued to dominate market performance, and uncertainty has prevailed as central banks’ major economies seek to curb inflation. Given that the correlation between the cryptocurrency markets and the S&P 500 index has been above 0.85 since March 29, traders are likely to be less inclined to bet on Ether disconnection from broader markets anytime soon.

Currently, the correlation measurement is in the range of -1, which means that selected markets go in opposite directions to +1, a perfect and symmetrical movement. At the same time, 0 would show a discrepancy or lack of connection between the two assets.

On May 17, US Federal Reserve Chairman Jerome Powell emphasized his intention to bring down inflation by raising interest rates until prices fall again towards a “healthy level”. However, Powell warned that the Fed’s austerity move could affect unemployment.

On the other hand, traditional markets were happy to be reassured that the monetary authorities intended a “soft landing”, but this did not diminish the unintended consequences of achieving “price stability”.

Uncertainty about the regulatory framework also had a negative effect

Further pressure on Ether’s price was a document released on May 16 by the US Federal Bureau of Investigation (CRS) that recently analyzed the TerraUSD (UST) crisis. The Legislature, which supports the US Congress, noted that the stablecoin industry is not “adequately regulated.”

At the same time, the total value of the locked Ethereum network (TVL) has decreased by 12% from the previous week.

Total value of Ethereum network locked, ETH. Source: Defi Llama

The TVL network decreased from 28.7 billion Ether to the current 25.3 million. The end-of-the-world scenario that led to the collapse of Terra (LUNA) had a negative impact on the diversified financial industry, an event that was felt in many parts of the smart chains’ blockchains. After all, investors should focus on the resilience of the Ethereum network during this unprecedented event.

To understand the position of professionals, including whales and market makers, let’s look at Ether’s future market data.

Ether future shows signs of distress

Quarterly futures contracts are preferred tools for whales and arbitrage desks due to their lack of volatile funding ratio. These fixed-term contracts usually trade with a slight premium to the placement markets, indicating that sellers want more money to hold on to settlements for longer.

These futures contracts should trade at a 5% to 12% annual spread in healthy markets. This condition is technically defined as “contango” and is not limited to cryptocurrencies.

Ether forward 3-month annual premium. Source: Laevitas

As shown above, the premium on Ether’s futures contracts fell below 5% on April 6, below the neutral market threshold. Furthermore, the lack of debt demand from buyers is obvious because the current 3.5% base index remains depressed despite the discounted price of Ether.

The collapse of Ether at $ 1,700 on May 12 emptied all leftover bullish sentiment and, more importantly, the TVL Ethereum network. Even if the Ether price shows rising channel formation, the bulls are nowhere near the confidence levels needed to place an indebted bet.

The views and opinions expressed herein are theirs alone author and do not necessarily reflect the views of Cointelegraph. Every investment and business involves risk. You should do your own research when making a decision.