3 Reasons Why Ethereum Remains Bullish After Falling to 17-Month Low

Author: Marcel Pechman Source: cointelegraph Translation: Shan Ouba, Golden Finance

Ethereum fell 13% between March 8 and March 11 as investors turned to short-term fixed income and cash positions to seek safety amid a global tariff war and growing concerns about a recession.

Ethereum prices need to rise 29% to return to $2,500.

Market concerns escalated after the United States took retaliatory measures against Canadian electricity surcharges.

S&P 500 futures (left, magenta) vs. Ether/USD (blue). Source: TradingView/Cointelegraph

Typically, traders tend to overreact, which increases the likelihood that Ethereum will rebound faster than other assets after market sentiment improves. While some believe that risk assets are driven by inflation and economic growth data, others believe that gains depend on stimulus measures and monetary expansion.

Whatever the catalyst for the next bull run, Ethereum prices would have to rise 29% from current levels of $1,940 to reclaim $2,500. Such a move would likely require an increase in demand from leveraged buyers, whose activity is currently at a five-month low.

ETH 2-month futures annualized premium. Source: Laevitas.ch/Cointelegraph

Traders want higher prices to compensate for longer settlement cycles, so in a neutral market, an annualized premium (basis rate) of 5% to 10% is expected. When the rate falls below this range, such as the current 4.5%, it indicates weak bullish conviction.

Excessive optimism played a role in Ethereum’s recent pullback, as $235 million in leveraged long positions were liquidated between March 10 and March 11.

Panic selling pushed Ethereum to a low of $1,744, its lowest level since October 2023. However, some indicators suggest a recovery could be on the horizon, as Ethereum derivatives and on-chain metrics show resilience.

Ethereum Layer-2 Network Growth

Ethereum is trading 60% below its all-time high of $4,868 in November 2021. This decline is primarily due to increased competition in the smart contract space and weakening demand for applications such as non-fungible tokens (NFTs), games, collectibles, metaverse projects, social networks, and Web3 infrastructure.

However, this view ignores a key factor.

At the end of 2021, average transaction fees exceeded $50, while activity on the Ethereum Layer-2 ecosystem was 97% lower than it is today.

For reference, despite the growth in daily operations per second, on March 11, the cost of swapping tokens on Ethereum’s base layer was $1.70, highlighting significant progress in network efficiency.

Daily average number of operations per second on Ethereum Layer 2. Source: L2beat

Even if bots generate 80% of Layer-2 transactions, the remaining 20% ​​activity on Base, Arbitrum, Optimism, ZKsync, and Blast is still about three times that of Ethereum's base layer. However, critics have a reasonable argument: despite the surge in network activity, validators are receiving significantly less rewards than at the end of 2021.

Ethereum Reclaims DEX Lead, TVL Grows

Ethereum has solidified its position as the second most popular choice for investors in traditional financial institutions, supported by $8.9 billion in spot exchange-traded funds (ETFs).

Meanwhile, competitors such as Solana are still awaiting regulatory approval for similar ETF products. Even if they receive approval, they will not be able to match the first-mover advantage of the Grayscale Ethereum Trust, which began trading publicly on the OTC market in June 2019.

In addition, Ethereum smart contract deposits, measured by total locked value (TVL), reached their highest level since July 2022 in ETH terms on March 11, up 10% over the past two weeks. Ethereum network TVL, ETH. Source: DefiLlama Ethereum’s TVL reached 24 million ETH, driven by the growth of liquidity staking, lending, yield farming, and tokenization of real-world assets. According to DefiLlama data, the network recently regained the lead in decentralized exchange volume (DEX), reaching $20.5 billion in seven days, surpassing Solana’s $13.9 billion.

This provides a bullish outlook for Ethereum’s price, driven by Layer-2 volumes approaching all-time highs, regaining the top spot in DEX volume, and growth in TVL deposits.

Ultimately, Ethereum’s trend reversal remains highly dependent on macroeconomic improvements, but once stabilized, Ethereum is well positioned to return to $2,500 as a key support level in the coming weeks.