3 Key Ether Derivatives Metrics Suggest $1,600 ETH Support Lacks Strength

Data shows Ether options traders less bearish than before, but lower gas fees and deposits smart contracts give ETH bulls little hope.

The price of Ether (ETH) has risen 60% since May 3, outperforming the leading cryptocurrency Bitcoin (BTC) by 32% over this period. However, evidence suggests that the current $1,600 support lacks strength as network usage and smart contract deposit metrics have weakened. Additionally, ETH derivatives are under increasing selling pressure from margin traders.

The positive price movement was primarily driven by the growing certainty of the merger, which is Ethereum's transition to a consensus proof-of-stake (PoS) network. During the Ethereum core developers conference call on July 14, developer Tim Beiko offered September 19 as a tentative target date for the merger. Additionally, analysts expect new ETH supply to be reduced by up to 90% after the network's monetary policy change, creating a bullish catalyst.

Ethereum's total value locked (TVL) benefited greatly from the collapse of Terra's ecosystem in mid-May. Investors have moved their decentralized finance (DeFi) deposits to the Ethereum network thanks to its robust security and proven applications, including MakerDAO (MKR) - the project behind the DAI stablecoin.

Total value locked by market share. Source: Defi Llama

Currently, the Ethereum network has a 59% market share of TVL, up from 51% on May 3, according to data from Defi Llama. Despite growing market share, Ethereum's current deposits of $40 billion in smart contracts appear small compared to the $100 billion seen in December 2021.

Demand for the use of decentralized applications (DApps) on Ethereum appears to have weakened, given the median transfer fee, or gas cost, which currently stands at $0.90. This is a sharp drop from May 3, when the network transaction costs more...