ETH’s fundamentals remain ‘strong:’ Analyst

There’ve been some rumblings about a potential bear case for ethereum.

Now hold your horses; there may be a few reasons to think that the bear hasn’t reared its head just yet. At least for now.

Jeff Sekinger, founder of Nurp, argued that the chart is actually bullish for ETH because it was able to find support after it bounced above $2,300. 

Meanwhile, Volmex founder Cole Kennelly told Blockworks that ETH’s fundamentals remain “strong.”

Read more: Where are we on the bull market chart?

“Notably, ETH is the second crypto asset to have spot ETFs, the blockchain of choice for most institutional tokenization efforts, and the home to the leading stablecoins. ETH boasts the most extensive ecosystem of applications and blockchain developers, paving the way for its peers. Short-term price action is unpredictable, though long-term, ETH is certainly bullish in my opinion,” he continued. 

K33 Research, in a note published Tuesday, said ETH is underperforming due to “stagnant” ETF flows. But there could be a bright side if ETH ETFs “mirror the path” of the bitcoin ETFs. If that’s the case, then analysts expect flows to pick up.

There’s also the fact that CME futures premiums for ETH are trading at a “rare premium” to BTC.

“We note a majority of the recent increased exposure originates from the September contract, indicating long-biased traders expect a sustained upward trend for the weeks ahead,” they wrote.

Volmex’s volatility indices, which measure the potential future volatility of both BTC and ETH over 30 days, show ETH at 67 and BTC at 57. 

To put that into perspective, the Ethereum Volmex Implied Volatility (EVIV) reading came in at 88 on Aug. 5 (remember the little crash in prices?), marking a high for the indices. ETH carved out a low of $2,100 that weekend, having opened the month at $3,200, before recovering to over $2,500. 

“Lower volatility levels will ultimately depend on what happens next. Bullish price action could lead to a positive spot-volatility correlation, where implied volatility increases as the spot price increases. On the other hand, until various uncertainties in the market resolve, implied volatility levels could stay elevated,” Kennelly explained. 

“Throughout most of 2023 and 2024, the EVIV-BVIV Index spread has been much lower, and even at times negative. Volmex’s BVRP and EVRP Indices (BTC and ETH Volatility Risk Premium Indices), which track the difference between 30-day implied volatility and realized volatility, are also around their lowest levels since the beginning of 2024.”

ETH currently sits just under $2,600, roughly 47% below its November 2021 high. 

Read more: Market madness arrives just in time for summer

But volume could pick up on the horizon, given that summer is wrapping up. Then, as many analysts have noted, the election and potential rate cuts (which could start as soon as September) may also play a role in the price of ETH. 

Meanwhile, CME traders are entering the September contract “amidst growing premiums point towards long-biased traders employing medium-term strategies rather than short-time frame strategies. CME’s past tendency to lead market momentum makes this a tendency we will pay close attention to in the coming weeks,” as K33 noted. 

A modified version of this article first appeared in the daily Empire newsletter. Subscribe here so you don’t miss tomorrow’s edition.

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