The price of Ether fell 7% between June 14 and June 15, hitting a three-month low and weighing on investor sentiment that the altcoin is on track to turn $2,000 for support.

It is worth noting that the $1,620 bottom represents a $196 billion market cap for Ether (ETH), which is more than PetroChina’s $186 billion and not far from chip maker AMD’s $198 billion.

Being the 66th largest global tradable asset is no small feat, especially considering that the cryptocurrency is only eight years old and does not generate any direct profit to maintain the project. On the other hand, securities are enjoying the benefits of corporate profits and possible government subsidies, so investors should perhaps be concerned about the recent decline in the price of Ether.

Ether price under pressure, subject to regulation and reducing network activity

Regulatory pressure has helped dampen investor appetite for Ether as the Securities and Exchange Commission he suggested changing the rules regarding the definition of exchange. Paul Grewal, Coinbase’s chief legal officer, rejected the proposed change, claiming it violated the Administrative Procedure Act.

More worryingly, decentralized application (DApp) usage on the Ethereum network has failed to gain traction despite a 75% drop in gas fees. The seven-day average transaction cost fell to $4 on June 14, from $16 a month earlier. Meanwhile, active DApp addresses fell by 18% over the same period.

30 Days Ethereum DApp Activity. Source: DappRadar

Note that the decline has occurred across the board, affecting decentralized finance, non-fungible token marketplaces, games, and collectibles. Interestingly, Total Value Locked (TVL), which measures deposits locked in Ethereum smart contracts, fell just 2% from mid-May to 14.6 million ETH, according to DefiLlam.

To analyze the probability of the Ether price falling below the $1,650 support, you should check the reduced ETH futures premium and the increased cost of protective put options.

Ether quarterly futures they are popular among whales and arbitrage tables. However, these fixed-month contracts typically trade at a slight premium to spot markets, indicating that sellers are demanding more money to delay settlement.

As a result, ETH futures in healthy markets should trade at an annual premium of 5 to 10% – a situation known as contango, which is not unique to crypto markets.

Ether 2-month futures annual premium. Source: Laevitas

Based on the futures premium, known as a fundamental indicator, professional traders avoid leveraged longs (bull bets). Despite a slight improvement to 2%, the indicator remains far from the neutral 5% mark.

To rule out externalities that could only affect Ether futures, we should analyze ETH options markets. The 25% delta skew indicator compares similar call (buy) and put (sell) options and turns positive when fear prevails because the premium of the protective put option is higher than the call option.

Ether 30-day 25% bias. Source: Laevitas

If traders are worried about the fall in the price of Ether, the indicator will move above 8%. On the other hand, general excitement reflects a negative 8% bias. As shown above, the delta slope has signaled fear since June 10 and peaked at 21% on June 15, a three-month high.

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The price of Ether seems to drop to $1,560

Investors tend to focus only on short-term price movements, forgetting that the price of Ether increased by 37% year-to-date in 2023. Additionally, by relying too heavily on Ethereum’s $24 billion TVL, traders may have missed signals of waning demand. for DApp use.

Bears currently have the upper hand on ETH derivative metrics, so a retest of $1,560 support is the most likely outcome. This does not mean that 2023 gains are in jeopardy, but until the regulatory FUD – fear, uncertainty and doubt – dissipates, bulls will have a hard time moving Ether above the $1,750 resistance.