Wintermute: Macro framework puts ETH at a disadvantage

Wintermute previewed the current macro framework, warning that ETH may not adapt easily to the current uncertainty and inflationary pressures. ETH has lagged behind other leading assets, losing another 10% of its price in the past week.

According to Wintermute, one of the leading market makers, the crypto market has to face growing inflationary pressures. As Cryptopolitan reported earlier, CPI inflation for March was forecasted at 3.7%, and the index continued heating up to 3.8% for April.

The rising inflation in Q2, as well as the ongoing uncertainty around the Strait of Hormuz blockade, are also raising the chances of a Fed rate hike by the end of the year. Crypto assets usually respond more favorably to a more liberal monetary policy, and a December hike may weigh on the market, according to Wintermute.

For crypto, the hope of a rate cut has been dashed, as Fed futures indicated no rate changes, or even a hike. In the past week, oil traded over $102 again, with Brent up by 8.6%.

Why is ETH vulnerable to uncertainty?

ETH performance responded negatively to growing uncertainty. ETH traded at $1,128.61, while BTC moved between $82K and $77K. ETH has now fallen close to its usual support level around $2,100, suggesting the asset may be ready for a bounce.

ETH erased 10.2% of its nominal price in the past week and lost positions to 0.0275 BTC. Funding rates weakened, while the weekly implied volatility increased.

ETF flows also weakened, showing ETH sentiment was weakened for both native traders and regular investors. Wintermute also noted ETH saw selling pressure of around $88M per day on average, driven by institutions. ETH selling has entered its most rapid period since February, according to Glassnode data and Wintermute’s analysis.

ETH has shown its ability to thrive during periods of relative stability, with both technical and financial innovation. However, chaotic world markets translate into rapidly worsening conditions for ETH. Despite this, Ethereum remains the main hub for decentralized finance, which has so far survived without liquidation cascades.

ETH sentiment shifted to fear

ETH sentiment worsened in the past week, from 47 points down to 27 points, indicating fear. In the past week, Binance futures markets saw accelerated selling.

The buyer-taker ratio on Binance dipped to 0.91%, a level historically correlated to market corrections.

ETH open interest weakened in the past week, losing $1B down to $12.4B. More than 72% of positions are long on Ethereum, potentially leading to additional long liquidations. For now, traders are reluctant to position on the short side, and ETH is not expecting a short squeeze.

Despite the short-term price weakness, ETH is positioned as a key piece of infrastructure, still carrying the bulk of stablecoins and on-chain finance. Around 24.6M ETH sits in accumulation addresses, and over 31% of the total supply is locked for staking, suggesting holders still have long-term confidence.