The price of ETH lost the $4,000 level after Bitcoin and altcoins underwent a correction. Is this a standard fix or is there something else underlying it?

Ether (ETH) fell on December 9, retesting the $3,800 level after failing to break above $4,050 — a resistance level that has remained active since December 2021. The 5% drop in price has raised concerns among traders about the sustainability of the bullish trend, especially as Bitcoin (BTC) is hovering near $100,000.

Investor concerns have been fueled in part by record-high inflows into Ether exchange-traded funds (ETFs), which have failed to break the multi-year resistance level. However, Ether futures data suggests that professional traders remain unfazed, showing no signs of expecting further corrections.

The annual premium for Ether futures in is currently 17%, unchanged from the previous week and well above the neutral benchmark of 10%. This increased premium could be a sign of increased demand for leverage in ETH, likely driven by arbitrage opportunities in perpetual contracts, also known as inverse swaps.

Retail traders typically avoid monthly futures due to their distance from ETH spot markets, which are due to their longer settlement cycles. Therefore, increased demand for leverage—reflected in interest rates on perpetual contracts—could affect the pricing of monthly futures as large investors and market makers closely monitor arbitrage opportunities.

Interest rates for Ether perpetual futures currently reflect a monthly premium of 2.7%, slightly above the neutral threshold of 2.1%. Notably, this indicator peaked at 5.4% on December 5, which likely contributed to the increased interest in leveraged positions in monthly ETH contracts.

ETF inflows and Ethereum activity fuel bullish derivatives demand

Other factors driving bullish ETH derivatives demand include an unprecedented $1.17 billion inflow into the Ether spot ETF since November 29. Additionally, on-chain activity on the Ethereum network increased by 24% compared to the previous week, alleviating concerns about the current average transaction fee of $7.50.

Interest rates serve as a barometer of market sentiment, especially in the futures market. Positive interest rates indicate a preference for long positions, with traders expecting higher prices.

When Ethereum interest rates reach multi-month highs, this trend signals an increase in bullish sentiment. However, history shows that such sharp increases can lead to short-term market imbalances that lead to corrections.

The Solana network maintained its position as the leader in terms of volume of decentralized applications (DApp), but Ethereum significantly closed the gap, reaching $24.2 billion in seven days. Including Ethereum‘s second-layer scaling solutions like Base, Arbitrum, Polygon, and Optimism, the combined volume grows to $48.6 billion — 65% more than Solana‘s $29.5 billion.

To assess whether professional ETH investors expect further price corrections, the skew indicator for ETH options should also be analyzed. In bearish markets, traders typically demand higher premiums for put (selling) options, leading to a 25% delta skew increase above 6%.

The Ether options market shows reduced optimism, as skew the indicator moved from -7% on December 6 to a neutral level of -2%. However, despite a 5% correction in the price of ETH and repeated failures to break through $4,050, the options market has shown resilience. A shift to bearish sentiment would skew the indicator above the neutral threshold of 6%.

The decline in the price of Ether appears to be more influenced by macroeconomic factors

The decline in the price of ETH appears to be more related to macroeconomic concerns than to cryptocurrency-specific factors. Investor confidence was likely shaken after Nvidia (NVDA) shares fell following the announcement of an antitrust investigation, as well as Chinese inflation data showing a 0.6% decline in November from the previous month.

Fears of a weakening global economy, potentially weighing on cryptocurrency markets, likely played a role in ETH’s latest price correction. However, trader sentiment remained bullish, as evidenced by indicators in the derivatives market. Ethereum remains below the $4,000 level after falling below that level last week. ETH is currently trading at $3,819, reflecting a 4.9% decline in the past 24 hours.

Despite the latest drop, the asset has rallied nearly 30% over the past month. However, ETH’s latest decline has taken it further away from its all-time high of $4,878 in 2021, and it is currently 20.5% below that peak.