The recent announcement of the United States Securities and Exchange Commission (SEC) suing cryptocurrency exchanges Binance and Coinbase has had an impact on the price of Ether, which retested $1,780. However, despite this drop, it is not unreasonable to suggest that Ether bulls should count themselves lucky that its price did not break below the crucial 67-day support.
In fact, the SEC’s actions have been a double-edged sword for Ether, with some analysts suggesting that the reason for Ether’s bounce is because it was not listed as a security in either of the cases brought against Binance and Coinbase. On Crypto Twitter, some analysts attributed the bounce in Ether to its being excluded from the list of tokens that SEC considers to be securities in the lawsuits.
However, this should not be taken as a sign that the SEC is planning to go easy on Ether in the future. As some analysts have pointed out, the omission of Ether does not necessarily mean that the SEC has given it a clean bill of health. The question of whether the SEC could be targeting the Ethereum Foundation in a separate lawsuit has been raised, given that SEC Chairman Gary Gensler refused to answer questions about Ether’s status before the U.S. House Financial Services Committee in April 2023.
Despite the uncertainty around Ether’s legal status, the short-term focus for traders should be on Ether’s price action, network data, and other factors that can influence investor sentiment.
One positive development for Ethereum is that the total value locked (TVL) in its decentralized applications (DApps) has seen a slight boost. The TVL measures the deposits locked in Ethereum’s DApps and has been in a downtrend since mid-March. The indicator reached a 14.35 million ETH bottom on June 3 but bounced back to 14.6 million ETH by June 6, according to DefiLlama.
Additionally, the number of active addresses interacting with DApps has seen a modest increase of 4% over the last 30 days for the top 12 DApps running on the Ethereum network. This is despite the average transaction gas fee remaining above $6.50.
If investors fear that Ether has higher odds of breaking below the $1,800 support, it should be reflected in the ETH futures contract premium and increased costs for protective put options. However, according to ETH futures premium, known as the basis indicator, professional traders have been avoiding leveraged longs (bullish bets). Even the retest of the $1,780 level on June 6 was not enough to flip those whales and market makers into bearish sentiment.
Turning to 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 25% delta skew moved above the positive 8% threshold on June 5, indicating bearishness. However, the subsequent bounce to $1,880 on June 6 has moved the metric back to a neutral state.
Overall, these metrics signal resilience for Ether, with the TVL bouncing back up to 14.6 million ETH, the 4% increase in DApps’ active addresses, and a meager impact on Ether derivatives markets, despite the retest of the $1,800 level. Ethereum network usage data also remains healthy, and the recent retest of the 67-day support was not enough to scare professional traders, according to derivatives metrics. Therefore, bulls appear to have dodged a bullet, reducing the risk of an imminent price crash. However, traders and investors should bear in mind that every investment and trading move involves risk and should conduct their own research when making a decision.