Ethereum's Struggles: Demand and Sentiment Decline

Ethereum is currently facing significant challenges as demand and market sentiment continue to decline. According to Cointelegraph, Ether has fallen eleven percent in the past week, even after briefly reaching the $3,400 mark on Saturday.

This decline coincided with a four percent correction in the Nasdaq index, raising concerns among traders about whether Ethereum can reclaim the $3,900 level. Market anxiety has intensified due to weak quarterly results from consumer-focused companies and lingering worries over high valuations in the artificial intelligence sector.

Additionally, the ongoing U.S. government shutdown is adversely affecting economic confidence. The report notes that the Ether futures market shows a four percent premium to spot markets, indicating limited bullish sentiment among traders.

However, this premium has not yet reached panic levels, suggesting that traders are still somewhat optimistic. Under normal conditions, this premium typically ranges between five to ten percent. The latest data from the University of Michigan survey indicates that U.S. consumer sentiment expectations have plunged to their lowest levels ever, attributed largely to the government spending shutdown.

Ethereum's recent underperformance, with a four percent decline relative to the broader crypto market, has frustrated investors. Total value locked in the Ethereum network has dropped to $74 billion, the lowest since July, marking a twenty-four percent decline over the past month.

One of the leading DeFi platforms built on Ethereum, Balancer v2, suffered a significant exploit resulting in a loss of $120 million, further shaking investor confidence. Revenue generated by Ethereum decentralized applications has also experienced a downturn, with October's figures showing an eighteen percent decline from September.

This reduced on-chain activity is putting pressure on Ether's staking yields. However, early signs of strength have emerged in the first week of November, with active addresses climbing five percent and transactions rising two percent, contrasting with declines seen in rival blockchains like Tron and BNB Chain.

ETH trader sentiment remains low due to a lack of demand for Ethereum spot exchange-traded funds, with U.S.-listed products recording net outflows of $507 million in November. Looking ahead, the only clear catalyst for Ethereum is the upcoming Fusaka upgrade scheduled for early December, which aims to improve scalability and security.

Nonetheless, with the derivatives market signaling weakness and broader macroeconomic concerns, short-term prospects for a breakout towards $3,900 appear limited.