Key takeaways:
- While bearish ETH futures trends and spot ETF outflows signal weak institutional appetite, staking demand prevents further decline.
- Falling exchange deposits and accumulation by BitMine indicate holder confidence in ETH’s long-term value.
Ether (ETH) price failed to reclaim the $1,700 level over the past week, tracking a broader weakness across cryptocurrency markets. This correction contrasts sharply with the bullish momentum seen in the US stock market. Traders worry that Ether’s appeal has faded due to sluggish on-chain activity and a distinct lack of demand for bullish leveraged positions.
ETH futures annualized funding rate. Source: Laevitas
The ETH perpetual futures annualized funding rate flipped negative on June 5, meaning shorts are paying premiums to keep their positions open. Bullish traders remain uncomfortable adding risk despite a 30% price correction over the past five weeks. The ETH futures aggregate open interest has also dropped significantly, indicating a pullback in institutional activity.
ETH futures aggregate open interest on major exchanges, ETH. Source: CoinGlass
Total exposure on ETH futures has fallen 30% in a month, hitting a 13-month low. This shrinking institutional appetite is evident in US-listed Ether spot exchange-traded funds, which posted $323 million in net outflows over two weeks.
ETH staking demands contrast with weak on-chain activity
Regardless of whether the decline in ETH futures demand can be pinned to record-breaking demand for the SpaceX (SPCX US) IPO, the impact on trader sentiment remains negative. Declining Ethereum on-chain activity has likely fueled this ETH price downtrend.
Ethereum Total Value Locked vs. weekly DApp revenue, USD. Source: DefiLlama
The total value locked (TVL) on the Ethereum network dropped 33% in two months to $37.5 billion. Concurrently, decentralized application (DApp) revenues plunged 43% in May compared to the previous six months. This reduced on-chain volume is typically associated with lower network fee generation and falling ETH utility.
Curiously, rising demand for Ethereum staking contrasts sharply with the bearishness in ETH derivatives. Staking approval for US-listed ETFs and aggressive accumulation by BitMine (BTMN US) vastly outpaced outflows during the period, despite a modest 2.7% yield.
ETH staking validator queue, ETH. Source: ValidatorQueue
The entry queue for ETH staking validators currently sits at 50 days, totaling over 2.9 million ETH. In contrast, the exit queue has zero wait time, a major sign of strength, given that 39.5 million ETH are currently staked. While there is no guarantee that stakers will lock up their tokens forever, this metric signals deep confidence in Ethereum’s long-term prospects.
Related: ETH futures traders lean into $1.6K range lows: Will Ether lead market recovery?
ETH estimated balance on exchanges, ETH. Source: Glassnode
Meanwhile, exchange-held ETH deposits dropped to 15.05 million from 16.15 million three months ago, pointing to heavy accumulation. This shift was partly driven by BitMine, which added 337,078 ETH to its balance sheet over the past 30 days, according to CoinGecko data.
Ultimately, weak demand for bullish ETH leverage shouldn’t be misread as a sign of rising downside risk. As long as staking metrics stay solid and spot ETF outflows remain reasonably contained, the odds of an ETH price crash to $1,500 look slim.