On February 10, Ethereum (ETH) surged past $2,100 as both Bitcoin and U.S. stock markets bounced back. This rally came after ETH had dropped steeply — falling 43% in just nine days to a low of $1,750. Since then, it has recovered about 22%, but the market is still cautious about Ethereum’s short-term direction.

In the crypto derivatives market, traders aren’t showing strong confidence. The two-month futures premium for ETH is hovering around 3% annually — below the neutral 5% level. This suggests that traders are still wary and that bearish sentiment remains in control. Even though ETH’s price has risen, investor outlook in the derivatives space hasn’t really improved over the past month.

Looking at on-chain data and overall market performance, Ethereum has lagged behind the broader crypto market by about 9% so far in 2024. This underperformance raises concerns about where investor money is going and whether Ethereum is losing momentum.

Still, Ethereum remains a dominant force in decentralized finance (DeFi). It leads the industry in Total Value Locked (TVL) — a key metric for blockchain usage — accounting for 58% of all funds locked in DeFi projects. If you include Layer 2 networks like Base, Arbitrum, and Optimism, Ethereum’s total share of TVL rises to over 65%. It also leads in fee revenue, showing that its network is still widely used and trusted.

However, not everything is smooth sailing. On-chain activity has slowed down recently, ending Ethereum’s deflationary trend — where more ETH was being burned than created. Now, ETH supply is growing again at an annualized rate of 0.8%, much higher than the near-zero growth rate seen a year ago.

There are also rising concerns about the long-term sustainability and security of Layer 2 solutions built on Ethereum. Vitalik Buterin, Ethereum’s co-founder, recently said the community needs to refocus on scaling the mainnet itself. He pointed out that some L2 solutions may not be decentralized or secure enough.

Overall, investor sentiment remains cautious. Uncertainty in the U.S. job market and questions about whether investments in AI infrastructure can keep growing have made people more risk-averse. The weak activity in Ethereum’s derivatives market shows that traders don’t yet believe in a strong short-term recovery. For now, more time and data are needed before anyone can confirm that Ethereum has hit a true bottom.