ETH price battled the $1,850 resistance and broke it on April 4, when ETH surged to a seven-month high above $1,900.Recently, the market has started to generate a lot of speculation about the catalyst driving the price of Ether
The upcoming Shanghai hard fork could be an important factor in the recent price rise of Ether. On April 12th, the possibility of validators withdrawing their deposits is high, allowing staking participants to move freely, but also creating the risk of Ether dumping.
There are currently 18 million ETH mortgaged on the Beacon Chain, and several safeguards have been enacted to prevent ether storms from disrupting the market. For example, due to the daily limit of 2,200 withdrawals, the maximum unlocked amount per day is 70,000 ETH.
Scalability risks remain
However, the upcoming hard fork still does not address some of the pressing issues currently plaguing the ethereum network. Scalability remains a major concern for most users, as average transaction fees have hovered around $5 in recent weeks, prompting users to start limiting their usage of dApps.
Additionally, the current consensus mechanism favors worm miners over other network participants. They can quickly copy all successful transactions from the mempool and get ahead of everyone else by deciding which is the first completed transaction in a block.
A recent example highlighted by security firm CertiK on April 3 resulted in $25 million in losses for arbitrage bots attempting to buy and flip tokens for a profit in a short period of time. Profit when validators replace transactions.
The number of active addresses for the top 10 dApps running on the Ethereum network has dropped by 18% over the past 30 days. This reflects investor frustration and dissatisfaction with ongoing issues such as miner front-running and high transaction costs.
30 Days of Dapp Activity | Source: DappRadar
Let’s take a look at the ETH derivatives data to see if the $1850 level can be a valid support based on ETH investor sentiment.
ETH Derivatives Not Improving Despite Rising Prices
The annual three-month futures contract premium should trade between 5% and 10% to cover the costs and risks involved. However, when contracts trade at a discount to traditional spot markets, it shows a lack of confidence among traders and is seen as a bearish indicator.
3-Month Ether Futures Annual Premium | Source: Laevitas.ch
Despite a 35% rise in ETH prices in 25 days, the Ether futures contango failed to breach the 5% neutral threshold. However, a lack of impact on buying demand doesn’t always mean negative price action. Therefore, traders should check the ether options market to see how whales and market makers are pricing the possibility of future price movements.
A delta deviation of 25% indicates that market makers are overcharging for call or put protection. For example, in a bear market, options traders offer higher chances of price declines, causing the skew indicator to rise above 8%. Bull markets, on the other hand, tend to push the 25% delta bias below -8%, meaning there is less demand for put options.
25% Delta Deviation for 60-day Ether Options | Source: Laevitas.ch
As of April 1, the delta bias was close to zero, indicating similar demand for protective puts and neutral put-calls. This has become the norm since March 22, when ether options last showed extreme optimism.
Currently, Ethereum still faces serious problems in terms of scalability. As such, on-chain dApp derivatives and indices increase the likelihood of ETH prices falling below $1,850.
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As reported by Cointelegraph