The Fading Momentum of a Major Rally
Ethereum has seen an impressive price surge over the past month, but on-chain and derivatives data are now indicating that this bullish momentum is running out of steam. While the price has risen significantly, traders are showing a degree of caution that casts a shadow on the possibility of a decisive breakout above the $4,000 level in the near term.
A Cooldown in Derivatives Markets
The derivatives market is a crucial indicator of trader sentiment, and for Ethereum, it’s signaling a significant cooling-off period. The annualized funding rate for Ether perpetual futures has dropped to just 9%, a stark decrease from the 19% seen just days earlier. This return to July 7 levels, when ETH was trading at a much lower price, suggests that the demand for leveraged long positions is fading. Additionally, ETH futures premiums have remained neutral for three weeks, showing a muted appetite for bullish bets despite a steady influx of capital into spot ETFs.
Ethereum’s Dominance Challenged
Ethereum is also facing challenges on its network. Its total value locked (TVL) has fallen by 11% in the last 30 days, hitting a five-month low. This decline is particularly notable when compared to its rivals. During the same period, Solana’s TVL saw a modest 4% drop, while BNB Chain’s deposits increased by 15%. Furthermore, Ethereum has lost its dominance in DEX volume, with both Solana and BNB Chain processing more volume over the past month. This shift in network activity and capital is a critical concern, as a stagnant base layer could allow competitors to continue gaining market share.
Corporate Buying Slows but Remains a Potential Catalyst
Corporate accumulation of Ethereum, which helped fuel its recent price rise, has also slowed down. While nine publicly listed firms hold substantial amounts of ETH, the pace of new inflows has cooled. If institutional buyers resume their aggressive accumulation, it could provide the necessary fuel to push Ethereum’s price past the $4,000 mark and potentially toward $5,000. For now, however, this buying pressure seems to be on hold.
ETF Inflows Continue to Impress
Despite the cautious sentiment in other areas, spot Ethereum ETFs are showing remarkable strength. They have now recorded their 20th consecutive day of net inflows, attracting an additional $17 million in a single day. July has been a particularly strong month for these funds, with net inflows reaching $5.43 billion, a massive jump from June’s numbers. This sustained institutional interest has boosted the total cumulative net inflows to over $9.64 billion, demonstrating that large investors see Ethereum as a core long-term holding.
The Rise of Altcoin ETFs
The success of Ethereum ETFs is paving the way for more diverse crypto investment products. Major issuers are now preparing to launch spot ETFs for other tokens, including Solana and XRP. This momentum is supported by SEC Chair Paul Atkins’ comments, which clarified that most crypto assets are not securities, potentially easing the regulatory path for these new products. The expansion of spot ETFs beyond Bitcoin and Ethereum is a major step toward cementing crypto’s place in mainstream finance.
Investor Rotation from Bitcoin to Ethereum
The strong performance of Ethereum ETFs is also indicative of a broader market trend. On the same day that Ethereum ETFs saw significant inflows, spot Bitcoin ETFs experienced net outflows of $114 million. This suggests a rotation of capital, with investors who may have missed Bitcoin’s surge now looking for new opportunities in Ethereum. This shift, combined with a tripling of trading volume for Ether ETFs in July, signals growing investor confidence and a potential change in market leadership.
Read More: Ethereum’s Enduring Dominance in Decentralized Finance
