ETH funding rate flashed negative, will ETH below $3,000 be discounted?

Important points:

• ETH is facing selling pressure as $480 million in liquidations and falling network fees impact investor confidence.

• ETH’s negative funding rate could impact a potential rebound rally.

Ether (ETH) price faced a 13.8% correction in three days and retested the $2,900 support for the first time in four weeks on Wednesday. The move comes as the entire cryptocurrency market plummeted as traders became risk-averse due to the deteriorating socio-economic environment.

ETH has returned to the $3,000 level after US President Donald Trump suspended import tariff increases on European Union countries. However, traders are worried about further declines after $480 million of bullish leveraged positions were liquidated in two days.

The funding rate for ETH perpetual futures briefly turned negative on Wednesday, meaning short sellers had to pay to maintain their positions. In a neutral situation, this indicator ranges from 6% to 12%, with longs (buyers) paying leverage. Still, lack of confidence is not necessarily a sign of weakness.

Traders are concerned that institutional interest in Ethereum is waning following recent outflows from the EtherSpot exchange-traded fund (ETF). These investment products currently hold $17 billion worth of ETH and represent a significant overhang in the market.

The U.S.-listed Ether ETF recorded net outflows of $230 million on Friday, reversing the trend from the previous week, when net inflows averaged $96 million. More worryingly, companies that have focused on accumulating ETH as a reserve strategy, such as Bitmine Immersion (BMNR US) and Sharplink (SBET US), are facing huge accounting losses.

ETH traders pay more for price downside protection: are the bears to blame?

To see if professional traders have turned bearish, they need to assess the demand for ETH options. As whales and market makers worry about further declines, the skew indicator rises above 8% as put (sell) options trade at a premium compared to equivalent call (buy) instruments. In contrast, bull markets are usually followed by skew indicators below -8%.

According to ETH Options Skew, traders are currently demanding an 11% premium to maintain downside exposure, the highest level in seven weeks. This indicator does not represent a bearish bet, but rather reflects traders’ displeasure with the ETH price being rejected multiple times at $3,400 over the past 10 weeks, while the Ethereum network’s on-chain indicators are declining.

Ethereum network fees have fallen 20% from their baseline over the past week, Nansen said. Meanwhile, competitor Solana experienced 36% higher fees, and BNB Chain collected 27% higher fees. More importantly, Solana’s leadership in transaction volume is undisputed, as the combined Ethereum base layer and scaling solution fell below 570 million in 7 days.

Related: The ETH whale has bought the dip, but can the accumulator prevent a drop to $2.7,000?
Ether’s path back to $3,400 will depend heavily on economic visibility, including profits from artificial intelligence infrastructure and the resolution of economic and geopolitical disputes.

Given the lack of demand for leveraged bullish ETH positions and the increasing competition in data processing for decentralized applications, the likelihood of sustained Ether price increases in the short term remains low.