Key takeaways:

• ETH faces selling pressure as $480 million in liquidations and falling network fees weigh on investor confidence.

• ETH’s negative funding rate could play a role in a potential rebound.

Ether (ETH) price faced a three-day 13.8% correction, retesting support at $2,900 for the first time in four weeks on Wednesday. The move comes after a acute decline in the cryptocurrency market as investors became risk-averse in the face of a deteriorating socio-economic environment.

ETH regained the $3,000 level after US President Donald Trump canceled import tariff increases on various European Union countries. However, investors fear further declines after the liquidation of $480 million in bullish leveraged positions over two days.

On Wednesday, the ETH perpetual futures funding rate briefly turned negative, meaning brief investors (sellers) had to pay to keep their positions open. In neutral circumstances, this ratio should be between 6% and 12%, with longs (buyers) paying for leverage. However, lack of self-confidence is not necessarily a sign of a bear.

Traders are concerned that institutional interest in Ethereum has waned amid recent outflows from Ether spot ETFs. These investment vehicles currently hold over $17 billion worth of ETH, representing significant market overhang.

US-listed Ether ETFs recorded net outflows of $230 million on Friday, reversing the previous week’s trend of an average of $96 million in net inflows. More worryingly, companies that have focused on ETH accumulation as a reserve strategy are facing significant accounting losses, including Bitmine Immersion (BMNR US) and Sharplink (SBET US).

Do bears rule?

To confirm whether professional traders have gone bearish, it is crucial to assess the demand for ETH options. When whales and market makers fear further declines, the skewness rate exceeds 8% because put (put) option trades are more steep compared to equivalent call (call) instruments. In contrast, bullish markets are typically followed by a deviation rate of less than -8%.

According to the ETH Options Deviation, investors are currently demanding an 11% premium to maintain exposure to declines, which is a seven-week high. This indicator is not an indicator of bearish bets, but reflects traders’ discomfort after repeatedly rejecting the $3,400 ETH price over the past 10 weeks amid falling Ethereum onchain metrics.

According to Nansen, Ethereum network fees have dropped 20% from baseline over the past week. Meanwhile, competitor Solana saw fees 36% higher, while BNB Chain saw fees 27% higher. More importantly, Solana’s leadership in terms of transaction volume remains undisputed, as the sum of the Ethereum base layer and scaling solutions was below 570 million in seven days.

Related: ETH whales bought the dip, but will accumulators prevent a drop to 2.7k? dollars?

Ether’s path to recovering the $3,400 depends largely on economic visibility, which includes profits from artificial intelligence infrastructure and the resolution of economic and geopolitical conflict.

Given the lack of demand for leveraged bullish ETH positions and increased competition in decentralized data processing applications, the chances of Ether prices sustaining a sustained augment in the near term remain slim.