Key takeaways:

• ETH remains capped below $3,000 as repeated breakout failures weaken investor confidence and dampen near-term momentum.

• Sustained ETH growth will require more network activity and DApp demand to offset frail leverage and ETF flows.

Ether (ETH) has traded within a tight 4% range over the past week, prompting traders to wonder whether the $2,900 support level will hold. The repeated failure to breach the $3,000 level coincided with a decline in Ethereum network fees and reduced demand for exchange-traded funds (ETFs).

This lack of confidence is also evident in ETH derivatives markets, prompting traders to reassess whether a sustained recovery is still possible in the near term.

On Tuesday, monthly ETH futures were trading at a 3% annual premium to spot markets, signaling extremely low demand for bullish leveraged positions.

In neutral conditions, this premium is usually above 5% to compensate for the longer settlement period, but has remained below this threshold for the past few weeks.

Ethereum fees are falling despite growing network activity

Some of the frail investor sentiment can be explained by falling Ethereum network fees as investors expect lower demand for ETH.

More importantly, demand for competing blockchains focused on decentralized applications (DApps) remains steady, prompting investors to question why the Ethereum network is lagging behind.

Ethereum network fees dropped 26% from baseline even as transaction volume increased 10% over the period. At first glance, Ethereum activity has not slowed down. However, much of ETH’s price outlook depends on the actual demand for blockchain processing.

By comparison, BNB Chain and Solana trades were largely flat over the same seven-day window. To determine whether the demand for Ether remains constant, the effective exploit of DApps on the network must be assessed.

Fees generated by Ethereum DApps have remained relatively stable over the past four weeks, although well below the $140 million peak recorded in October. Data shows that activity on the Ethereum network is stagnating, but far from collapsing.

The lack of optimism about ETH’s near-term dynamics is also evident in the selling pressure of Ether ETFs. This metric is commonly tied to institutional demand, especially since nearly $17 billion has flowed into these instruments.

The group is managed by BlackRock’s iShares Ethereum Trust ETF (ETHA US), which has $10.2 billion in assets under management.

Daily net outflows from Ether ETFs since December 17 of $307 million may not be material as they represent less than 3% of total assets, but the lack of demand continues to weigh on investor sentiment. Even professional investors may become skeptical after two weeks of ETH’s repeated failure to stay above the $3,000 level.

Related: Ethereum quietly sets a record: 8.7 million contracts deployed in a single quarter

Moreover, it is hard to separate Ether’s needy performance from broader concerns about the risks associated with a global economic slowdown.

As governments face tighter fiscal conditions, central banks have less ability to cut interest rates, increasing the risk of recession. As a result, investors will likely remain cautious about the cryptocurrency market until there is more clarity on the economic outlook.

While frail demand for bullish ETH and ETF leveraged positions is not a death sentence, sustained growth likely depends on stronger Ethereum network activity and growing demand for DApps.

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