By Chris Hollingworth 
Ether (ETH) experienced a 9.3% decline between March 26 and March 28, dipping to the $1,860 level for the first time in a fortnight. This correction triggered over $114 million in liquidations of leveraged ETH futures and caused the premium relative to the regular spot market to plummet to its lowest point in over a year.
Traditionally, Ether’s monthly futures trade above the regular spot price due to sellers seeking compensation for the extended settlement period. A 5% to 10% annualized premium typically denotes neutral markets, reflecting opportunity costs and exchange risks. However, on March 8, ETH futures slipped below this range following a 24% price correction in the preceding two weeks.
At present, the 2% annualized premium on ETH futures indicates a tepid demand for leveraged long positions, though recent price movements heavily influence this metric. For instance, on October 10, 2024, the ETH futures premium fell to 2.6% after a 14% price correction over two weeks, only to climb back to 7% as ETH recovered most of its losses. Essentially, the futures premium seldom foretells shifts in spot price trends.
To gauge whether whales have soured on Ether, observing how the market prices put (sell) options relative to call (buy) options is crucial. A 25% delta skew metric exceeding 6% signifies heightened hedging demand when traders anticipate a downtrend, while bullish sentiments often drive the skew below -6%. Currently standing at 7%, the ETH options’ 25% delta skew hints at wavering confidence among professional traders, heightening the potential for further bearish momentum.
From a derivatives market standpoint, there are scant signs that the recent ETH price correction has reached its nadir. Investors appear uncertain about the $1,800 support level’s resilience. Some analysts attribute waning interest in ETH to a sharp drop in Ethereum network activity, while others point to the migration towards layer-2 scalability as a factor diminishing the base chain fee potential.
Ethereum faces stiff competition from a growing array of blockchains catering to specific niches, such as Hyperliquid focusing on synthetic assets and perpetual trading, and Berachain specializing in staked assets across liquidity pools. The success of certain DApps, like Ethena transitioning to its layer-1 blockchain, could further challenge Ether’s dominance, especially with substantial TVL and funding backing these projects.
While it might be premature to predict a continued decline in ETH price, a forthcoming major protocol update looms. Investors should closely monitor Ethereum’s Pectra upgrade for its impact on base layer fees and overall user experience. Until then, the odds of ETH outperforming the broader altcoin market appear slim.
