Key Insights

• ETH derivatives reflect a diminishing bullish sentiment as Ethereum’s Total Value Locked (TVL) declines, causing ongoing risk aversion.
• Job losses in the U.S. are increasing, and seasonal hiring is weak, making traders cautious until new liquidity emerges.

Ether (ETH) gained 15% from its recent low of $2,623. Yet, the derivatives outlook suggests traders are still cautious. With top ETH traders hesitant to leverage bullish positions and a decrease in Ethereum’s network fees, the likelihood of a $4,000 resurgence seems lower. Questions linger about what changes are needed for ETH to breach $4,000 convincingly.

ETH perpetual futures annualized funding rate. Source: laevitas.ch

Demand for bullish ETH positions has been nearly nonexistent since Monday, as evidenced by the perpetual futures funding rate. Typically, this rate is maintained between 6% and 12% to cover costs, yet current hesitance is largely due to uncertainty following the flash crash in October.

After a significant 20% drop in Ether’s price on October 10, which led to extensive liquidations, trader confidence has faltered. Reports from DefiLlama indicate that the TVL in the Ethereum network plummeted from $99.8 billion on October 9 to $72.3 billion now, intensifying price pressures.

Blockchains ranked by 7-day network fees, USD. Source: Nansen

Ethereum’s network fees decreased by 13% this past week, despite a stable transaction volume, creating investor anxiety about a negative cycle leading to inflationary forces for ETH. This is critical as Ethereum’s burn mechanism depends on sustained on-chain activities.

ETH top traders’ long-to-short ratio at OKX. Source: CoinGlass

Among top traders at OKX, there is a notable retreat from bullish ETH exposure. The long-to-short ratio currently trends 23% towards bearish positions, indicating a significant absence of bullish leverage from whales and market makers.

Market Conditions

Weakened U.S. labor data exacerbates trader apprehension. Some firms have reported increased operational costs, and consumer spending has dipped post U.S. government shutdown continuing until November 12, according to Yahoo Finance. Reuters has noted over 25,000 job cuts announced by U.S. companies in November.

Adam Sarhan, CEO of 50 Park Investments, remarked, “You don’t have mass layoffs when the economy is strong.” If job losses increase, this could further damage consumer confidence and affect risk assets, including Ether.

U.S. federal government surplus or deficit, USD. Source: Federal Reserve

To support economic growth amidst slowing revenues and high costs, the U.S. government needs to continue increasing its debt. Huge deficits may trigger different investment strategies, which could be pivotal for Ether’s price movement.

Although the soft labor market dampens sentiment, it might also push the U.S. Federal Reserve toward a more lenient approach. Despite recent positive shifts in market dynamics following the resolution of the government shutdown, uncertainty in U.S. employment continues to erode trader sentiment.

Whether Ether can revert to a $4,000 price point remains uncertain until central banks implement new liquidity measures.

At present, investors seem more inclined towards tech stocks and bonds, limiting short-term gains for ETH.