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Reasons why ETH Rate is pinned below $2,000 Mark.

03-Jun-2022 By: Sudeep Saxena
Reasons why ETH Rate

Reasons why ETH Rate is pinned below $2,000 Mark.

These trade data explain why the ETH price is encountering heavy resistance at the $2,000 mark.

Despite the failed attempt to breach the descending channel resistance at $2,000 on May 31, Ether's (ETH) market structure remains bearish. This three-week price pattern could indicate that a retest of the $1,700 support is in the works.

A number of equities-related reasons are translating to negative sentiment in the crypto market on the non-crypto side. Microsoft (MSFT) cut its profit and revenue forecasts this week, citing tough macroeconomic conditions as the reason. The Federal Reserve of the United States announced in its monthly "Beige Book" that economic activity in some parts of the country has slowed, and the Fed is planning to decrease its $8.5 trillion asset portfolio to combat persistent inflation.

On the plus side, according to an institutional investor poll published by The Economist magazine, 85 percent of respondents believe open-source cryptocurrencies such as Bitcoin (BTC) or Ether (ETH) are valuable as diversifiers in portfolio or treasury accounts.

Ethereum still has a long way to go.

Since Ether began its slide three weeks ago, the total value locked (TVL) of the Ethereum network, or the total quantity of assets submitted to the network, has plummeted by 5.5 percent.

On May 10, the network's TVL reached a high of 28.7 billion Ether, and it now sits at 27.1 million. The USD Terra (UST) — now known as TerraUSD Classic (USTC) — stablecoin collapse on May 10 had a significant impact on Decentralized Finance (DeFi) deposits. Overall, the indicator is showing a mild decline, which is to be expected following such a rare occurrence.

These fixed-month contracts often trade at a 4% to 11% premium to spot markets, indicating that sellers are requesting more money to defer settlement for a longer period of time. This is also a regular occurrence in traditional assets like stocks and commodities.

The premium on Ether futures contracts has stayed at 3% over the last month, well below the neutral-market threshold of 5%. Despite Ether's 24 percent loss in three weeks, the current 2.8 percent basis signal remains weak, indicating a lack of leverage demand from purchasers.

The fear of a worldwide economic downturn continues to influence cryptocurrency pricing.

The drop of Ether to $1,700 on May 27 sapped any remaining positive emotion and, more crucially, resulted in the liquidation of $235 million in leveraged long futures contracts. According to the TVL metric, even if Ether price tested the $2,000 resistance on May 31, there is little evidence of strength from derivatives or DeFi deposits.

As long as investors' attention is focused on traditional markets and the effects of worsening global macroeconomic conditions, there is little prospect for a long-term upward price decoupling for Ether.

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