Ethereum Surges 29% as Sentiment Shifts, But Caution Lingers in Derivatives and ETF Markets

Ethereum Breaks Out of Bear Market With 29% Rally, Shorts Liquidated

Ethereum (ETH) saw a powerful rebound between May 8 and 9, jumping by 29% from a local low of $1,385 on April 9 and effectively breaking out of a 10-week bear trend. The move led to over $400 million in short liquidations, suggesting large players were caught off guard. However, despite the impressive price surge, the derivatives market remains cautious—ETH futures premiums have yet to break above the 5% mark, indicating a lack of demand for leveraged long positions.

Ether 3-month futures annualized premium. Source: laevitas.ch

Analysts remain split on the rally’s implications: some see it as a setup for further short covering, while others believe Ethereum’s underlying fundamentals haven’t changed enough to justify sustained upside.

Neutral Sentiment in Derivatives and Spot ETF Flows Dampens Enthusiasm

Even as ETH notched its strongest single-day performance in four years, ETF interest didn’t follow. On May 8 alone, U.S.-listed Ether spot ETFs experienced $16 million in net outflows—the third consecutive day of redemptions, according to Farside Investors. The ETF exodus highlights a disconnect between price action and investor conviction.

Ether US-listed spot ETFs' daily net flows, USD million. Source: Farside Investors

This caution also extends to ETH options markets, where call and put options are trading at nearly identical levels, reinforcing a neutral sentiment among whales and institutional players.

Ethereum Remains Dominant in DeFi, Despite Network Fee Drop and Underperformance

Despite tepid investor enthusiasm, Ethereum continues to lead in decentralization and total value locked (TVL), with $64 billion secured across its ecosystem—nearly triple the combined TVL of Solana, BNB Chain, and Tron. Recent upgrades to Ethereum's layer-2 scalability are helping solidify its infrastructure dominance.

Still, a sharp 85% drop in network fees from January to April has reduced demand for ETH, impacted staking yields, and dulled bullish momentum. The decreased network activity also weakens the protocol's burn mechanism, which typically supports ETH’s deflationary narrative.

Deribit 30-day ETH options delta skew (put-call). Source: Laevitas.ch

Trump’s Altcoin Reversal May Signal Renewed Political Tailwinds for Ethereum

A potential boost to Ethereum’s narrative came from an unexpected source: former U.S. President Donald Trump. After earlier signaling support for Solana, Cardano, and XRP, Trump reportedly distanced himself from altcoin-focused crypto lobbying, feeling “used,” according to a Politico report published May 8. The development could shift political sentiment back in Ethereum’s favor, especially after Trump’s more cautious March 6 executive order on digital assets.

If sentiment continues to improve and competitor lobbying efforts fade, Ethereum could plausibly target the $2,700 level—even in the absence of immediate ETF or derivatives-driven momentum.