Ethereum faces resistance at $1,750 based on 3 key price metrics.

The price of Ether (ETH) fell by 7% between June 14th and June 15th, reaching its lowest level in three months and impacting the belief of investors that the altcoin was on its way to turning $2,000 into support.

It is important to note that the $1,620 bottom represents a $196 billion market capitalization for Ether, which is higher than PetroChina’s $186 billion, and not far from chipmaker AMD’s $198 billion.

Being the 66th largest global tradable asset in the world is no small feat, especially considering that the cryptocurrency is only 8 years old and does not return any kind of direct profit for the project’s maintenance. On the other hand, securities enjoy the benefits of corporate earnings and eventual government subsidies, so perhaps investors should be concerned about the recent price drop from Ether.

Ether price pressured succumbs to regulation and lowered network activity

Regulatory pressure helped to reduce investors’ appetite for Ether as the Securities and Exchange Commission (SEC) proposed a rule change regarding the definition of an exchange. Paul Grewal, chief legal officer of the Coinbase exchange, has pushed back against the proposed change, claiming that it violates the Administrative Procedure Act.

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More worryingly, usage of decentralized applications (Dapps) on the Ethereum network failed to gain momentum despite gas fees plummeting by 75%. The 7-day average transaction cost dropped to $4 on June 14th, down from $16 one month prior. Meanwhile, Dapps active addresses declined by 18% in the same period.

Note that the decline happened across the board, affecting decentralized finance (DeFi), NFT marketplaces, gaming, and collectibles alike. Interestingly, the total value locked (TVL), which measures the deposits locked in Ethereum’s smart contracts, declined by only 2% versus mid-May to 14.6 million ETH, according to DefiLlama.

To analyze the chances of Ether’s price breaking below the $1,650 support, one should check for a reduced ETH futures premium and increased costs for protective put options.

Ether quarterly futures are popular among whales and arbitrage desks. However, these fixed-month contracts typically trade at a slight premium to spot markets, indicating that sellers are asking for more money to delay settlement.

As a result, ETH futures contracts in healthy markets should trade at a 5 to 10% annualized premium — a situation known as contango, which is not unique to crypto markets.

According to the futures premium, known as the basis indicator, professional traders have been avoiding leveraged longs (bullish bets). Despite the modest improvement to 2%, the indicator remains far from the neutral 5% threshold.

To exclude externalities that might have solely impacted the Ether futures, one should analyze the ETH options markets. The 25% delta skew indicator compares similar call (buy) and put (sell) options and will turn positive when fear is prevalent because the protective put option premium is higher than the call options.

The skew indicator will move above 8% if traders fear an Ether price crash. On the other hand, generalized excitement reflects a negative 8% skew. As displayed above, the delta skew has been signaling fear since June 10th and peaked at 21% on June 15th — the highest level in three months.

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Ether’s price looks poised to drop down to $1,560

Investors tend to focus solely on short-term price movements and forget that Ether’s price is up 37% year-to-date in 2023. Moreover, by relying too much on Ethereum Network’s $24 billion total value locked (TVL), traders might have missed the signals of weakening demand for Dapps use.

Currently, the market conditions are in favor of the bears based on the ETH derivatives metrics. As a result, it is highly probable that a retest of the $1,560 support will occur. This does not necessarily imply that the potential gains for 2023 are at risk, but until the regulatory FUD (fear, uncertainty, and doubt) clears up, it will be difficult for the bulls to push Ether beyond the $1,750 resistance level.

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