The Ethereum (ETH) price is currently consolidating just below the $4,000 mark, nearing multi-year highs following the successful implementation of the Dencun upgrade. This upgrade promises a substantial boost to the Ethereum ecosystem by significantly reducing transaction fees on its layer-2 blockchain.
Furthermore, the upgrade lays the groundwork for future advancements such as protodank sharding, which aims to alleviate Ethereum’s historically high layer-1 fees.
If the recent upgrade does indeed lead to a significant drop in layer-2 fees, platforms like Arbitrum and Optimism could see a surge in new capital and users, presenting a positive outlook for ETH. Increased utilization of layer-2 solutions translates to heightened demand for Ethereum’s layer-1 blockchain as a settlement layer.
Despite these developments, Ethereum’s price has yet to break above the $4,000 threshold, contrasting with Bitcoin’s (BTC) recent achievement of printing fresh record highs surpassing $73,000 on Wednesday.
Why Has the Ethereum Price Not Broken Above $4,000 Yet?
In recent weeks, market sentiment regarding the approval of spot Ethereum ETFs has turned increasingly bearish.
Bloomberg’s ETF analysts recently indicated that they estimate the likelihood of Ethereum ETF approval by May to be only 35%.
One of the primary reasons for this pessimism is the perceived lack of substantial communication between the SEC and the applicants.
Additionally, the SEC’s ambiguity regarding Ethereum’s classification as either a security or a commodity contributes to the uncertainty. While the SEC’s approval of Ether futures ETFs last year suggests a leaning towards considering Ethereum as a commodity, it’s important to note that SEC Chair Gary Gensler, known for advocating the viewpoint that Ethereum is a security, held this stance prior to assuming his role with the SEC.
The current state of confusion and uncertainty surrounding the potential approval of spot Ether ETFs is significantly impacting market sentiment.
This negative sentiment is not only evident in Ethereum’s inability to surpass the $4,000 mark but also in the options markets.
According to The Block, the 25% delta skew of ETH options expiring in 7, 30, and 60 days has recently dipped below 0.
This indicates that options buyers are now paying a premium for puts compared to equivalent calls. Traditionally, investors purchase put options to speculate on or safeguard against price declines, whereas they acquire call options to speculate on or protect against price increases.
Long-term Picture Still Bullish?
There’s a possibility that the Ethereum price could experience a short-term decline, potentially retracing to find support around the $3,570 level.
Despite this short-term outlook, the 25% delta skew of ETH options expiring in 180 days remains notably above zero. This suggests a prevailing sentiment that, despite potential short-term fluctuations, Ethereum is poised to sustain its upward trajectory alongside the broader crypto market.
Furthermore, there’s a widespread consensus that the approval of Ethereum spot ETFs is not a matter of if, but when. Concurrently, ongoing network upgrades are anticipated to drive further adoption of the Ethereum network.
