Traders are feeling less bullish about Ethereum, even though the second-largest crypto has posted 200% gains in the first half of the year. Derivates data reveals that ETH investors are more affected by its underperformance when compared to Bitcoin(BTC) and many are expecting an incoming decline.
Ethereum traders are showing reduced optimism for a short-term recovery of the asset’s price. This is suggested by many indicators. The first among them is institutional demand which has failed to back up Ethereum adequately. Last week, Ethereum’s institutional investment vehicles witnessed major sell-offs, whereas Bitcoin outflows began to stabilize. Altogether, Ether fund outflows touched $50 million in the previous week.
The network is also due for an update in July, which may impact the altcoin’s price action. The London hard fork or the EIP 1559 update will cap the network’s gas fees and improve the user experience. But for now, Ethereum is still operating on the proof of work model, leaving miners dissatisfied while underperforming against Bitcoin by 16% this month.
If ETH miners start looking into competing smart contract blockchains or the market experiences unexpected hurdles that pressurize cryptocurrencies, Ethereum investors could be in for a bumpy ride.
Ideally, quarterly futures should trade at a premium to an asset’s regular trading price in a healthy market. For the management of exchange risk, a 4% to 8% premium in the December contracts should be sufficient. When futures start trading below a certain range, analysts read it as a sign of a looming bear market.
According to data from TradingView, Bitcoin December futures appear to be recovering up to 3.5%. But this improvement has little to no effect on Ethereum. Although, both the currencies are placed in a neutral-to-bearish region, evidence suggests that altcoin holders aren’t expecting a short-term recovery.
Another factor that can adversely impact altcoins is a potential 30% decline in Bitcoin prices. According to the co-founder of Decratrader, FilbFilb, a 30% drop in BTC could prompt altcoins to fall twice as much as the primary crypto.
Similarly, Clem Chambers, the chief executive of financial analytics website ADVFN, has projected another slide in the crypto market. Chambers thinks Bitcoin sell-offs could drag its price to $20,000 in a repeat of the crypto winter from 2018.
Even though crypto market indicators are trending in a neutral-to-bearish territory, it’s obvious to expect a graver outcome for Ether due to the ongoing uncertainties emerging from its transition to the proof of stake model.