Ethereum Surges 29% Ending 10-Week Bear Market

Ethereum (ETH) experienced a significant rally, surging by 29% between May 8 and May 9. This sharp increase marked the potential end of a 10-week bear market that had bottomed out at $1,385 on April 9. The rally triggered the liquidation of over $400 million in short ETH futures positions, indicating that major market participants were caught off guard by the sudden price movement.

Despite the impressive price gain, traders have maintained a neutral stance in ETH derivatives. The ETH futures premium has yet to exceed the 5% threshold typically associated with a bullish market, suggesting limited demand for leveraged bullish positions. This lack of conviction among traders could either signal a genuine trend reversal or precede another test of the $2,000 level.

Ethereum's recent network upgrades have enhanced layer-2 scalability and solidified its position as the leading platform in terms of decentralization and security. Ethereum's total value locked (TVL) stands at $64 billion, significantly higher than the combined TVL of its three largest competitors—Solana, BNB Chain, and Tron—which collectively hold $22.3 billion.

However, the limited demand for spot Ether exchange-traded funds (ETFs) has emerged as a key warning sign. Even with Ether's strongest single-day price performance in four years, US-listed Ether spot ETFs experienced net outflows totaling $16 million on May 8. This muted enthusiasm can be partly attributed to the sharp 85% drop in Ethereum network fees from January to April, which has lowered overall demand for ETH and negatively affected net staking yields.

In the options market, put (sell) options are trading at similar levels to equivalent call (buy) options, indicating a neutral sentiment. This outcome is somewhat discouraging for Ether bulls. Nevertheless, Ether could regain market attention following the reversal of President Donald Trump's position on certain altcoins. Trump had previously endorsed competing altcoins but later severed ties with the lobbyist who proposed the idea of a strategic crypto reserve.

Despite the evident apathy in both the Ether derivatives market and spot ETF flows, a rally toward the $2,700 level remains plausible. This potential upside could be driven by a shift in investor sentiment in response to the failed lobbying efforts undertaken by some of Ethereum's competitors. Some analysts interpret the current market conditions as an opening for further short covering, while others contend that Ethereum's core fundamentals have yet to improve meaningfully.