Ethereum Struggles at $3,000 as Negative Funding Rates and Network Competition Threaten Further Decline
Ethereum is currently trading at almost $3,000, which is a 1.7% increase in the last 24 hours. This comes after a rough week when the second
Quick overview
- Ethereum is currently trading near $3,000, reflecting a 1.7% increase in the last 24 hours after a significant drop earlier in the week.
- Institutional investors are buying the dip, with notable purchases including 24,555 ETH worth $75.5 million and 20,000 ETH worth $58.8 million.
- Despite some buying pressure, market sentiment remains cautious, highlighted by negative funding rates and significant withdrawals from Ether spot ETFs.
- Ethereum's network activity is declining, raising concerns about its competitive position against rivals like Solana and BNB Chain.
Ethereum ETH/USD is currently trading at almost $3,000, which is a 1.7% increase in the last 24 hours. This comes after a rough week when the second-largest cryptocurrency by market size tested important support levels. After a steep three-day drop of 13.8% that sent ETH down to $2,900 on Wednesday, bulls were able to go back above the critical $3,000 mark after President Donald Trump said he would delay raising tariffs on imports from European Union countries. But this rebound is still weak because the market is becoming worse and institutional participants are sending mixed signals.
Institutional Whales Buy the Dip Amid Massive Liquidations
Even though the price is low, on-chain data shows that big players are buying a lot. Trend Research borrowed 70 million USDT from Aave to buy 24,555 ETH worth $75.5 million. This brought its total holdings to 651,310 ETH worth $1.92 billion. Also, an OTC whale account bought 20,000 ETH worth $58.8 million through the FalconX and Wintermute platforms.
BitMine has become a very aggressive accumulator, adding 92,511 ETH in January alone, worth $268 million, as part of its plan to become the largest Ethereum staking organization. The company expects to make between $367 million and $393 million a year in staking rewards once it has fully staked its projected 4.2 million ETH.
But this buying pressure hasn’t been enough to make people less worried about the market as a whole. Over the course of two days, more than $480 million in bullish leveraged positions were sold off, with longs accounting for $257 million in forced selling in the last 24 hours alone. BlackRock also sent 30,828 ETH worth around $91 million to Coinbase Prime, which is even more concerning because it could mean that institutions are selling.
Negative Funding Rates Signal Capitulation, But Caution Persists
On Wednesday, the funding rate on ETH perpetual futures temporarily became negative. This is an uncommon event that forces short sellers to pay to keep their positions. In normal market conditions, this indication is between 6% and 12%, with longs paying for leverage. People typically see negative financing rates as contrarian buy signals, which means that people are very pessimistic and a rebound could happen soon.
But data from the options market shows that traders are still quite worried about more losses. The ETH options delta skew right now reveals that traders are asking for an 11% premium for put (sell) options over call (buy) options. This is the biggest level in seven weeks. People are more worried about losing money after being turned down many times at $3,400 in the preceding 10 weeks.
Adding to the pessimistic mood, US-listed Ether spot ETFs saw $230 million in net withdrawals on Friday, which was a change from the previous week’s pattern of $96 million in average net inflows. These ETFs now own more than $17 billion worth of ETH, which is a lot of money that is still out there. Bitmine Immersion and Sharplink are two companies who retain ETH as a reserve strategy and are losing a lot of money on their books.
Ethereum Network Fundamentals Deteriorate as Competition Intensifies
Another problem for bulls is that Ethereum’s network activity is going down. Over the previous week, network fees reduced by 20% from their baseline levels. In contrast, competitor Solana SOL/USD saw rates rise by 36%, and BNB Chain BNB/USD saw fees rise by 27%. Solana is still the leader in transaction volume, with Ethereum’s base layer and scaling solutions executing less than 570 million transactions in seven days.
This competitive pressure in decentralized application processing makes many wonder what Ethereum is worth in a blockchain world that is getting more and more congested.
ETH/USD Technical Outlook: Bears Target $2,700 Support Zone
From a technical point of view, ETH’s closing below $3,000 on Tuesday caused a bearish break of structure, which pushed the price below the four-month point of control near $3,100. This level had the most volume in the last four months, and if it goes down, it means that the market has left its most popular price range.
The price movement right now is still inside a symmetrical triangular pattern, but bulls are having a hard time holding up the support line. If this level doesn’t hold, technical analysis suggests that external liquidity zones around $2,718 and $2,623 are likely to be the next places where the price will go down. The whale versus retail delta has changed from positive to negative, going from 0 to -6,480. This means that whales are either cutting down on long positions or adding shorts more aggressively than retail traders. This change has traditionally come before periods of higher volatility.
It’s interesting that 76% of retail traders are currently long, which could mean that they are supporting a reversal near important swing lows.
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