Brutal 20% Ethereum price sell-off is not over, but is there a silver lining for ETH?

Ether (ETH) price stabilized near $2,300 after a sharp 20% drop over three days, hitting a low of $2,255. This decline shook market sentiment, as Ether hadn’t traded at these levels since October 2024. However, the ETH derivatives market is showing early signs of recovery and strength, suggesting a potential rebound to $2,800.

The 30-day ETH futures are now trading at a 7% premium over the spot market, up slightly from 6% two days ago. Premiums between 5% and 10% are considered neutral, as traders typically expect higher returns for the longer settlement period. This shift indicates weaker bearish pressure below $2,600, which could boost confidence among bullish investors.

Weak macroeconomic conditions deter ETH price recovery

The journey for ETH to hit $2,800 again might take weeks or months, but data suggests the lowest price point is likely in the past. Still, the recovery speed depends on investor caution, with recent US unemployment and inflation figures raising concerns.

US jobless claims for the week ending Feb. 22 reached a seasonally adjusted 242,000, the highest in three months. Also, US pending home sales in January fell to a record low, down 4.6% from the prior month, per the National Association of Realtors. Economists surveyed by Reuters, as reported by Yahoo Finance, had predicted a smaller drop of 1.3%.

Investors are increasingly anxious about new import tariffs announced by US President Donald Trump, targeting goods from China, Canada, and Mexico. Trump also threatened a 25% tariff on imports from the European Union, prompting the EU to promise a firm and swift response to unfair trade restrictions, according to CNBC. 

Nvidia’s shares fell 3.3% on Feb. 27, despite exceeding quarterly earnings forecasts and providing strong guidance for Q1 2025, reflecting investor nervousness. Meanwhile, gold prices dropped 2.2% in two days, sliding to a two-week low of $2,870, highlighting broader market concerns impacting even safe-haven assets.

Ether options markets display resilience despite the price crash

Currently, the ETH options skew is at -2%, sitting comfortably within the neutral range of -6% to 6%. This suggests resilience among whales and market makers, especially notable since ETH’s price fell 20%. Despite the drop, there’s no significant rush to buy put options, indicating confidence in the market.

Current market conditions resemble Feb. 3, when ETH’s price plummeted 38% in under three days, falling from $3,437 to $2,124. Back then, the ETH delta skew metric stayed near zero, reflecting solid market confidence. Ether quickly recovered to $2,750 within a day and held the $2,550 support level for the following two weeks. 

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Ether’s path to $2,800 remains achievable as its key competitor, Solana, faces declining momentum in the memecoin sector. Meanwhile, Ethereum maintains its dominance in total value locked (TVL), driven by strong demand for liquid staking, lending, yield aggregators, and automated onchain liquidity protocols.

The pace of ETH’s price recovery largely depends on Ethereum delivering its planned upgrades and fostering incentives for projects to develop their own layer-2 solutions. This, in turn, enhances the base layer’s utility and strengthens staking rewards, creating a clear path for ETH price recovery.

This article is for general information purposes and is not intended to be and should not be taken as legal or investment advice. The views, thoughts, and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.