Key takeaways:
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The ETH futures premium and the put options’ skew indicate that traders are hedging aggressively despite an 8% price rebound.
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Ethereum’s weekly fees slid 49% amid weakened DEX activity, while Tron and Solana fees rose 9%.
Ether (ETH) gained 8% on Tuesday but stalled near $3,000 as derivatives markets signaled doubt about further upside. The move tracked the broader cryptocurrency rally as traders priced in better odds of new economic stimulus, especially after stress in Japan’s government-bond market on Monday.
Sentiment improved as investors grew more confident that US monetary policy would turn less restrictive. The Federal Reserve (Fed) ended its balance-sheet reduction program on Dec. 1, and traders expect an interest-rate cut on Dec. 10. More importantly, major financial institutions in the US have sharply increased their use of repurchase agreements, adding liquidity to short-term funding markets.
The tech-heavy Nasdaq index has recovered most of the losses it incurred in November and now trades only about 3% below its all-time high. Still, ETH derivatives positioning remains tight, suggesting limited conviction among bullish traders.
On Tuesday, the annualized premium on ETH monthly futures versus spot markets held at 3%, unchanged from the prior week. Readings below 5% point to very weak demand for leveraged long exposure, an understandable outcome given Ether’s 22% drop over the past 30 days.
Ether lags stocks as global policy turns expansionary
Ether’s underperformance relative to the US stock market raises concerns, especially as central banks signal more expansionist economic measures.
The Fed injected $13.5 billion through overnight funding on Dec. 1, the second-highest level in more than five years. Designed as a liquidity backstop, this facility once held over $2.5 trillion in spare cash in 2022, following stimulus efforts and extremely low interest rates. However, those balances were later withdrawn as participants sought higher returns elsewhere.
Additional factors may be weighing on crypto demand, including fears of excessive investment in artificial-intelligence infrastructure and renewed regulatory pressure on stablecoins. China’s central bank also pledged to increase its crackdown on money-laundering activities and unauthorized cross-border transfers involving digital assets.
Professional Ether traders remain uneasy about downside risks, a view reflected in persistent stress across options markets.
ETH put (sell) options traded at a 6% premium to comparable call (buy) contracts, a pattern usually associated with bearish conditions. For reference, the skew metric was at a neutral 4% on Friday. This shift suggests something is still restraining traders’ optimism, even as the rally in US equities signals improving risk appetite across traditional markets.
Ethereum network fees dropped to their lowest level in more than three years, falling to $2.6 million over a seven-day period, down from $5.1 million four weeks prior. Part of this decline reflects a decrease in activity on decentralized exchanges, where volumes dropped to $13.4 billion in the same period after reaching a peak of $36.2 billion in August.
Related: Ether price analysis–Will ETH continue to decline in December?
More concerningly, rival chains Tron and Solana posted a 9% increase in seven-day fees, according to Nansen data. A dormant Ether whale movement on Sunday added to investor anxiety. An entity active since Ethereum’s genesis block in 2015 transferred 40,000 ETH to a new address, sparking speculation about a potential sale.
Ethereum’s Fusaka upgrade, scheduled for Wednesday, is an important step toward better scalability and an improved wallet-management experience. Still, demand for decentralized applications has weakened, resulting in lower fees. Currently, there is limited evidence that ETH is positioned to outperform the broader cryptocurrency market.
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