The price of Ether has stabilized around $2,300 after a 20% crash in three days, with a low of $2,255. This drop has shaken market sentiment, as Ether had not fallen to this level since October 2024. However, the ETH derivatives market has shown early signs of recovery and strength, suggesting the price could rebound to $2,800.

30-day ETH futures premium (annualized). Source: Laevitas.ch

The 30-day ETH futures are currently trading at a 7% premium to the spot market, slightly higher than the 6% two days ago. A 5% to 10% premium is considered neutral, as traders typically expect higher returns due to the longer settlement period. This change suggests that the bearish pressure below $2,600 has weakened, which may boost the confidence of bullish investors.

Weak macroeconomic environment hinders ETH price recovery

The process for ETH to return to $2,800 may take weeks or months, but the data suggests the lowest point may have passed. However, the recovery speed depends on investors' cautious attitudes, as recent US unemployment and inflation data have raised market concerns.

In the week ending February 22, the seasonally adjusted number of initial jobless claims in the US reached 242,000, a three-month high. Additionally, the US Pending Home Sales Index fell 4.6% month-over-month in January, a record low. According to the National Association of Realtors (NAR) data, economists had previously forecast a decline of only 1.3%, far below the actual drop (data from Yahoo Finance and Reuters).

Investors are increasingly concerned about new import tariffs announced by US President Donald Trump, targeting goods from China, Canada, and Mexico. Furthermore, Trump has threatened to impose a 25% tariff on EU imports, prompting the EU to vow a swift and forceful response to unfair trade restrictions (data from CNBC).

Although Nvidia reported quarterly earnings that exceeded expectations and provided a strong outlook for the first quarter of 2025, its stock price still fell 3.3% on February 27, reflecting investor unease. Meanwhile, gold prices fell 2.2% in two days, reaching a two-week low of $1,870, indicating a widespread weakening of risk-averse sentiment in the market.

Despite the price crash, the Ethereum options market remains resilient

Ethereum 60-day options 25% Delta skew (put-call). Source: Laevitas.ch

Currently, the ETH options skew is at -2%, within the neutral range of -6% to 6%. This indicates that whales and market makers have shown resilience, especially in the face of a 20% drop in ETH prices. Despite the price decline, there has been no rush to buy put options, suggesting investors' confidence in the market.

The current market conditions are similar to February 3, when ETH prices plummeted 38% in less than three days, from $3,437 to $2,124. However, ETH's Delta skew indicator remained close to zero at the time, reflecting stable market confidence. Subsequently, the Ethereum price quickly rebounded to $2,750 and held the $2,550 support level for the next two weeks.

The path for Ethereum to return to $2,800 remains viable, as its main competitor Solana has seen a decline in momentum in the memecoin space. Meanwhile, Ethereum maintains a dominant position in Total Value Locked (TVL), driven by strong demand for liquid staking, lending, yield aggregators, and automated on-chain liquidity protocols.

The speed of ETH's price recovery will largely depend on Ethereum's ability to complete upgrades as planned and provide incentives for projects to develop their own layer-2 solutions. This will enhance the utility of the base layer, strengthen staking rewards, and pave the way for an ETH price recovery.