ETH lost 43% in just nine days before bottoming at $1,750 on Friday. A subsequent relief bounce lifted prices roughly 22%, pushing ETH back into the $2,100 range. The rebound in Bitcoin and US equities provided temporary breathing room for crypto, but cautious sentiment in derivatives markets continues to dominate.

Derivatives Markets Are Still Not Convinced

Ethereum monthly futures traded at only a 3% premium over spot markets on Monday. In healthy bullish conditions, this spread is typically expected to exceed 5%.

This muted premium has remained largely unchanged for nearly a month. Even as price approached $1,800, there was no meaningful increase in risk appetite among derivatives traders.

In short: bulls have not fully stepped onto the field.

On the macro side, growing uncertainty around the US labor market and lingering questions over the sustainability of AI infrastructure investments are weighing on risk sentiment. As a result, building strong upside momentum for ETH in the short term appears difficult.

Ethereum Is Lagging — Yet Still Leading

Ethereum has underperformed total crypto market capitalization by roughly 9% throughout 2026. Naturally, this raises a key question: why is capital rotating away from ETH?

Declining interest in decentralized applications is not unique to Ethereum. Still, when layer-2 solutions are included, the network remains the clear leader in total value locked (TVL) and fee generation.

Deposits on Ethereum’s base layer account for 58% of the entire blockchain industry. That figure rises above 65% when Base, Arbitrum, and Optimism are added.

For comparison: the largest application on Solana barely exceeds $2 billion in TVL. Meanwhile, the biggest DApp on Ethereum’s base layer holds over $23 billion. Solana’s Jupiter wouldn’t even rank in Ethereum’s top 14. Usage-wise, Ethereum remains dominant — but price is not reflecting that reality.

The Real Pressure: Supply Growth and Layer-2 Debate

Over the past 30 days, Ethereum’s base layer generated roughly $19 million in network fees, while the layer-2 ecosystem contributed another $14.6 million. Despite this, the network faces criticism for heavily subsidizing scalability through optimistic rollups.

Buterin stated that layer-2 solutions have taken a more difficult path than expected, noting that current bridges are largely controlled by multisig setups — a structure that doesn’t align well with Ethereum’s original vision. This has raised fresh concerns about network security and long-term direction.

According to Buterin, the decentralization journey of layer 2 has proven more complex than anticipated. Most existing bridges rely on multisig control, which clashes with Ethereum’s foundational security principles.

Layer-2 solutions are not disappearing. Demand for privacy-focused or application-specific networks is likely to persist. Still, today’s structure is failing to reassure investors.

Another critical issue is ETH supply. The narrative of Ethereum becoming deflationary has weakened as network activity slowed. The burn mechanism depends on base-layer data usage — when activity declines, ETH supply starts rising again.

Over the past 30 days, annualized ETH inflation reached 0.8%. A year ago, this figure was close to zero. It may seem minor, but it significantly impacts long-term investor psychology.

Technical Outlook Remains Weak

Short-term technical conditions are also far from encouraging. After losing the $2,114 support level, Ethereum has maintained a bearish structure. Last week, price pulled back into a daily support zone and bounced, but failing to close the week within that area weakened the bullish case.

For now, the major support zone sits around $1,365. Liquidity has accumulated heavily at this level, and market participants believe price may attempt to sweep it.

Previous uptrends also began with reactions from this region. In summary: Ethereum’s primary direction remains downward. Without a pullback toward $1,365, the odds of a strong and sustainable recovery look slim.

Has the Bottom Arrived?

Ethereum prices may have rebounded. Markets appear temporarily relieved.

But when derivatives data, onchain activity, and macro uncertainty are combined, it’s hard to confirm a definitive bottom. What we’re seeing for now looks more like a relief rally.

A lasting trend reversal will likely require more time.

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According to Glassnode, Ethereum’s market cap of $123 billion is trading only 0-20% above cost basis. Notably, there is intense investor interest in the $2,300-$2,500 range. On the other hand, in April 2025, the average ETH gas fee dropped to $0.16, the lowest level since 2020. 

Ethereum Technical Indicators Point to Bullish Momentum 

CryptoQuant analyst Ibrahim Cosar identified a bull flag formation in Ether technical analysis, signaling an upward move after consolidation. Ether has been trading between $2,400 and $2,700 for the past three weeks, setting the stage for a potential price breakout. Cosar also emphasized that ETH is holding firmly above the 200-day Exponential Moving Average (EMA). The daily RSI remains below the overbought threshold, showing slight momentum loss, but still supports an upward breakout. 

The largest share of #ETH market cap – $123B – sits just 0–20% above cost basis. That cohort swelled from $2.3K to $2.5K, meaning even a modest price drop could flip a large chunk of supply into loss.
Despite recent gains, $ETH remains in a fragile position. pic.twitter.com/5Ay5Jx5Qv5

— glassnode (@glassnode) May 27, 2025

This indicator is historically associated with strong market sentiment and price increases. Furthermore, analyst “Elcryptotavo” noted that if Ethereum’s open interest surpasses Bitcoin’s, it could indicate a market peak. However, ETH has not reached that threshold yet, suggesting room for further gains. 

Additionally, activity in ETH derivatives market is drawing attention. The rise in open interest is backed by a 40% increase in trading volume, reaching $79.51 billion. The trend of investors entering long positions strengthens bullish expectations. As a result, Ethereum’s technical indicators and market dynamics point to a potential short-term breakout toward the $3,000–$3,600 levels. According to the analyst, if momentum continues, new all-time highs for ETH could be within reach. 

Ethereum founder Vitalik Buterin has proposed a new structure for the Ethereum Virtual Machine (EVM): the use of RISC-V, a simpler and more efficient coding architecture. This change aims to make Ethereum faster, more flexible, and future-proof—enhancing usability for developers and providing a stronger long-term infrastructure. This development is also seen as a catalyst for Ethereum’s continued rise. 

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