Ether can go for an unstable period in the near term, as the cost of borrowing wrapped ether has spiked and technical indicators that point to excessive analysis, according to a crypto analyst.
“We believe that Ethereum is looking vulnerable to the near term,” the 10x Research Head of Research Markus Thielen told Cointelegraph on Wednesday.
“The market is entering a quieter stretch of Tag -heat – especially in the US in August – as technical indicators remain overweight.”
Weth “less attractive -attract” in the middle of climbing the funding rate
Thielen explained that a significant risk for ether (Eth) Price is the denial of borrowing income opportunities wrapped in ether (weth) – a tokenized version of the ETH widely used on decentralized financial platforms (DEFI).
Ether traded at $ 3,623 at the time of publication, up to 49% in the past 30 days, According to Kay Nansen. Kamag -child asset strength against Bitcoin (Btc) has moved 34% to the same period, According to In the ratio of the ETH/BTC of TradingView.
According to In Thielen’s market report on Wednesday, the use of the Lending Platform Aave (Ghost) has risen from 86% to 95% since July 8, as the borrowing has released the supply available in the lending pool.
“The variable cost of weth borrowing has climbed and it is not worth borrowing ETH now, therefore it should be more disliked by people who borrow ETH in AAVE,” Thielen explained.
“If it goes on, it can trigger a significant love, especially at funding and positioning rates still stretched,” he added.
Thielen is optimistic about Ether’s long -term prospects
Thielen explained that most of this borrowing demand came from entrepreneurs using action on strategies to boost the yield. However, he added that the current market environment reduced the profitability of these trading:
“The so-called ‘looping’ techniques remain useful when ETH borrowing rates are low and the steth-to-eth peg remains stable.”
Thielen said more than 90% of Ether loans use variable interest rates, leaving borrowers to the sudden increase in borrowing costs.
Related: Ether appeared as the winner after crypto ‘waterhed moment’: Bitwise
He said that when variable rates are rising as they have recently, it can “send ripple effects throughout the Ethereum ecosystem.”
Despite the possible headwinds in the short term, Thielen expects a more desirable setup for Ether after September.
Historically, the Q3 has become the second worst quarter for Ether, returning 8.19% since 2013, while Q4 is usually the strongest, with an average return of 22.59%, According to in coinglass data.
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