Key takeaways:

• ETH derivatives positioning shows vast investors increasing long exposure as sentiment stabilizes despite continued weakness in broader risk markets.

• Public companies with significant ETH reserves continue to trade at a discount, signaling that investors remain unconvinced of a near-term recovery.

Ether (ETH) saw a pointed 15% decline from Wednesday to Friday, falling to $2,625, its lowest level since July. The move wiped out $460 million worth of leveraged ETH bull positions in two days and extended the decline to 47% from the August 24 record high.

Bull demand for ETH is still largely absent from derivatives markets, although sentiment is slowly leaning towards a potential rebound to $3,200.

The annual funding rate for ETH perpetual futures hovered near 6% on Friday, up from 4% the previous week. In sustainable conditions, the ratio typically ranges from 6% to 12% to cover the cost of capital. ETH futures, while still far from bullish, have shown some resilience even as macroeconomic uncertainty increases.

U.S. consumer and housing market data signal growing economic stress

A study from the University of Michigan shows that 69% of consumers now expect unemployment to enhance in the coming year, more than doubling from last year. Joanne Hsu, director of consumer research, reportedly said, “Concerns about the cost of living and income dominate consumers’ views about the economy across the country.”

During Tuesday’s earnings call, Home Depot CEO Ted Decker said the company continues to “see lower exposure to larger discretionary projects,” largely due to continued weakness in the housing market. Decker said residential real estate turnover as a share of total available supply had reached a 40-year low and home prices had begun to adjust, According to to Yahoo Finance.

Part of Ether’s degenerating confidence among traders is due to nine straight sessions of net outflows in spot exchange-traded funds (ETFs). About $1.33 billion left these products during this period, partly due to actions by institutional investors limiting exposure to risky assets. The US dollar strengthened against major foreign currencies as concerns around the artificial intelligence sector grew.

The US dollar index (DXY) hit a six-month high as investors sought the safety of their stored cash. This may seem counterintuitive given the U.S. economy’s sturdy ties to the tech sector, but investors are simply holding reserves until employment data becomes clearer and consumer demand recovers from the prolonged U.S. government shutdown.

Top traders in OKX increased their long positions even as Ether fell to $2,700 from $3,200 on Sunday. Confidence is gradually improving on the back of sturdy quarterly results and year-end guidance from Nvidia (NVDA US), and after Federal Reserve Bank of Up-to-date York President John Williams said he sees room to cut interest rates in the near term as the labor market weakens.

Related: BitMine announces ETH staking plans for 2026 amid market collapse

The cryptocurrency bear market has been particularly tough for companies that have built vast ETH reserves through debt and equity issuance, such as BitMine Immersion (BMNR US) and ShapeLink Gaming (SBET US). These stocks are currently trading at a discount of 16% or more to their ETH holdings, highlighting the lack of investor comfort.

From a derivatives perspective, whales and market makers are increasingly convinced that the low was $2,650. Still, bullish sentiment likely hinges on renewed inflows of spot ETFs in the Ether market and clearer signals of less restrictive monetary policy, meaning it could take several weeks for Ether to potentially return to $3,200.

This article is for general information purposes and is not and should not be treated as legal or investment advice. The views, thoughts and opinions expressed here are solely those of the author and do not necessarily reflect or represent the views and opinions of Cointelegraph.