ETH ETF Inflows, Layer-2 Growth Bolster $2.4K Level

Key takeaways:

• ETH holds $2,400 in support despite a 15% price drop and $277 million in liquidations.

• Layer-2 network growth and spot ETH ETF inflows sustain investors’ confidence in Ether.

Ether (ETH) failed to sustain the bullish momentum that peaked at $2,880 on Wednesday, though it also showed resilience near the $2,450 level. While investors aren’t particularly thrilled with the current price, derivatives metrics point to a growing sense of confidence.

On Friday, the Ether futures premium briefly turned bearish as  ETH price plunged 15% to $2,440, wiping out $277 million in leveraged long positions over two days. However, by Sunday, the futures premium had reclaimed the neutral 5% threshold, suggesting that traders are regaining confidence in the $2,400 support level.

Ethereum layer-2 ecosystem surges 

The recent surge in Ethereum layer-2 scaling solutions likely contributed to Ether’s rally in early May. This coincided with Solana and BNB Chain overtaking Ethereum in decentralized exchange (DEX) trading volumes. Combined activity on Base, Arbitrum, Unichain, and Polygon has surpassed Ethereum’s $65.5 billion in monthly DEX volume.

Many Ether holders are frustrated by the persistently low fees on Ethereum’s base layer, a key factor behind the growth in ETH supply. On the other hand, rollups have enabled scalable solutions, opening new possibilities. For example, Base’s largest decentralized application, Morpho, supports custom infrastructures for use cases like collateralized lending and yield generation.

On June 12, Shopify launched a limited rollout of USDC stablecoin payments on the Base blockchain. The product includes a 1% cashback incentive and is expected to fully launch by the end of 2025. This collaboration with Coinbase underlines the low-cost, secure nature of layer-2 blockchain Base.

Ether derivatives markets display resilience amid ETH price weakness

ETH options markets offer further insight into sentiment among professional traders following the drop below $2,500 on Tuesday. In a neutral environment, the 25% delta skew typically fluctuates between negative 5% and +5%, reflecting balanced pricing between put (sell) and call (buy) options.

Currently, ETH put options are trading at a 4% discount compared to equivalent call options, which keeps them within the neutral range. This suggests that, despite ETH failing to maintain the $2,500 level, whales and market makers haven’t turned bearish. Part of that optimism may stem from the $830 million in net inflows to Ether US-listed spot exchange-traded funds (ETFs).

Declining ETH balances on exchanges are generally viewed as bullish, since deposits imply a readiness to sell, while withdrawals usually signal staking or long-term holding, reducing immediate supply pressure.

As of June 17, the total Ether balance on exchanges dropped to 16.31 million ETH, down from 16.71 million a month earlier. This aligns with Ethereum’s total value locked (TVL), which rose 6% over the same period to $67.2 billion, according to DefiLlama.

Related: BlackRock drives $412M Bitcoin ETF inflows amid Israel-Iran conflict

Ultimately, Ether’s trajectory is becoming increasingly influenced by rising geopolitical tensions in the Middle East and the ongoing trade disputes between the United States and its key economic partners.

While traders are not expecting ETH to revisit $3,000 in the near term, the strength of derivatives markets suggests that the $2,400 support level may continue to hold. 

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.