Key takeaways:

• ETH derivatives are showing waning bullish appetite as Ethereum’s TVL declines and network fees decline, reinforcing persistent risk aversion.

• US layoffs are rising and seasonal employment is waning, leaving investors waiting for modern liquidity before rebuilding confidence in ETH’s short-term gains.

Ether (ETH) is up 15% from last Friday’s low of $2,623, but derivatives indicators show investors remain cautious. The lack of bullish leverage from top ETH traders coupled with falling Ethereum network fees weakens the case for sustained growth. As a result, investors are wondering what needs to change for ETH to convincingly regain the $4,000 mark.

As of Monday, there is virtually no demand for leveraged bullish positions on ETH, as indicated by the perpetual futures funding rate. Under normal circumstances, this rate should be between 6% and 12% to offset the cost of capital. Still, much of the current volatility is due to uncertainty surrounding October’s flash crash.

A 20% drop in Ether prices on October 10 triggered widespread liquidations across centralized and decentralized platforms, dealing a major blow to trader confidence. Total value locked (TVL) on the Ethereum network dropped to $72.3 billion from $99.8 billion on October 9, according to DefiLlama data. The decline in deposits increases pressure on ETH’s price outlook as investors prepare for lower demand.

Ethereum network fees dropped 13% over the past week, even as transaction volume remained steady. This discrepancy has investors concerned about the negative feedback loop of shrinking network deposits, which could ultimately result in higher inflation for ETH. After all, Ethereum’s combustion mechanism relies entirely on continuous onchain activity.

By aggregating spot, futures and margin positions, OKX’s top traders reduced their bullish exposure to ETH. The long to tiny ratio is currently skewed 23% towards bearish positions. More importantly, whales and market makers have repeatedly failed to maintain significant bullish leverage, signaling a clear lack of conviction.

Ether traders are waiting for clarity as delicate US labor market data undermines confidence

Another factor that worries traders is the weakening American labor market. Some companies cited rising operating costs while consumer spending fell following the U.S. government shutdown that lasted through November 12. According to to Yahoo Finance. Reuters reported that U.S.-based companies announced job cuts of more than 25,000 people in November.

Adam Sarhan, chief executive of 50 Park Investments in Recent York, reportedly said, “When the economy is strong, there are no mass layoffs.” If layoffs accelerate, they could further erode consumer confidence and weigh on risky assets, including Ether.

The U.S. government must continue to boost debt to sustain growth as slowing revenues and rising costs outpace economic momentum, while large-scale spending on AI infrastructure takes years to deliver productivity gains or significant gains for the broader economy. Huge deficits favor alternative investments, which may be a potential factor affecting the price of ether.

While the delicate labor market is hurting market sentiment, a weaker economy could also prompt the U.S. Federal Reserve to adopt a more accommodative stance. Moreover, the risk-free environment has eased following the reversal of the slowdown in economic activity caused by the US government shutdown that lasted until November 12.

Historically, cryptocurrencies have benefited from such terms; however, the current lack of clarity about the U.S. labor market continues to undermine business confidence. It is unclear whether Ether will be able to recover the $4,000 before modern liquidity injections arrive from major central banks to support global growth.

For now, investors seem more focused on tech stocks and bond markets, leaving circumscribed room for a short-term move higher in ETH.

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.