Ethereum faces tough path to $3.9K as sentiment and demand fizzle

Key takeaways:

• Ethereum ETF outflows and cautious traders show limited confidence in ETH price going higher for now.
• Low derivatives premiums suggest a muted outlook for Ether’s price.

Ether (ETH) fell 11% over the past week, even after reaching the $3,400 mark on Saturday. The drop came alongside a 4% correction in the Nasdaq index, which erased gains from the previous two weeks. Traders are now debating whether ETH still has chances to reclaim the $3,900 level.

Concerns about global economic growth surfaced after weak quarterly results from consumer-focused companies and renewed worries over high valuations in the artificial intelligence sector. Meanwhile, the longest-ever US government shutdown continues to hurt the economy.

ETH monthly futures annualized premium. Source: laevitas.chEther futures are trading at a 4% premium to spot markets, unchanged from the previous week. The data shows a limited appetite for bullish positions, although it has not yet approached panic levels below 0%.

Under normal market conditions, this premium typically sits between 5% and 10% to account for the longer settlement period.

Related: Cathie Wood’s ARK Invest adds BitMine shares as it offloads $30M in Tesla stock

Market anxiety grew after US consumer sentiment expectations plunged to their lowest levels ever, according to a University of Michigan survey.

November’s reading, released Friday, was the second weakest since at least 1978 and was largely blamed on the ongoing US government spending shutdown, AP reported.

ETH/USD (blue) vs. Total crypto capitalization (red). Source: TradingViewPart of Ether investors’ frustration stems from ETH 4% weekly underperformance compared to the broader crypto market. This suggests that, beyond rising macroeconomic risks, other factors have likely made traders more cautious toward Ethereum.

Total value locked (TVL) on Ethereum, USD. Source: DefiLlamaThe total value locked on the Ethereum network fell to $74 billion—the lowest since July—marking a 24% drop over the past 30 days. Investors were caught off guard after one of Ethereum’s leading decentralized finance (DeFi) platforms, Balancer v2, was hit by a $120 million exploit on Monday.

Ethereum DApps monthly revenue, USD. Source: DefiLlama## Ethereum DApps revenue declined in October

Ethereum decentralized applications (DApps) generated $80.7 million in revenue in October, an 18% decline from September. The decrease is particularly concerning for ETH holders, as lower onchain activity puts downward pressure on the native staking yield

Ethereum’s design includes a mechanism that burns ETH during periods of high demand for blockchain data processing, helping balance network activity and supply.

Active addresses and transactions, 7 days. Source: NansenHowever, the first week of November shows early signs of strength for Ethereum compared with rival blockchains. Active addresses climbed 5% over the past seven days, while transactions rose 2%. By contrast, both Tron and BNB Chain saw declines in onchain activity.

Ethereum spot exchange-traded funds daily flows, USD. Source: CoinGlassETH trader sentiment has been weighed down by the lack of demand for Ethereum spot exchange-traded funds (ETFs). US-listed products recorded $507 million in net outflows during November, and there were no notable ETH corporate reserve purchases, according to Strategic ETH Reserve data.

Currently, ETH’s only clear catalyst is the upcoming Fusaka upgrade, slated for early December. The update is designed to deliver several scalability and security enhancements to the network.

However, with derivatives markets signaling weakness and investors wary of a slowing global economy, the chances of a breakout toward $3,900 in the short term appear limited.

This article is for general information purposes and is not intended to be and should not be taken as legal or investment advice. The views, thoughts, and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.

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