Ethereum’s (ETH) future seems uncertain with possible instability looming, says Markus Thielen, 10x Research head of research. He points to increased borrowing costs of the tokenized version of ETH – wrapped Ether (wETH), widely utilized in decentralized finance (DeFi) platforms, and technical indications of overvaluation as contributing factors to this projection.

Thielen expressed his concerns to Cointelegraph, stating, “In the near term, we perceive Ethereum to be at risk. As we enter a quieter summer phase, especially in the US in August, technical indicators are remaining deeply overbought.”

The rise in the funding rate has made wETH “less appealing” as Thielen indicates. A growing risk for Ethereum’s price is the dwindling profit potential from borrowing wETH. As of now, Ethereum trades at $3,623, marking a 49% rise over the past 30 days as per Nansen.

Thielen’s Wednesday market report revealed that the usage of lending platform Aave (AAVE) has seen an uptick from 86% to 95% since July 8, outpacing the available supply in the lending pool. He further elucidated, “The variable borrowing cost of wETH has escalated, making ETH borrowing unprofitable. As a result, we could see more unwinding by those who have borrowed ETH on Aave.”

If the current situation continues, Thielen warns it could incite significant unwinding, particularly with stretched funding rates and positioning. Despite short-term challenges, Thielen remains positive about Ethereum’s prospects post-September.

Statistics show that Q3 is generally the second weakest quarter for Ethereum, with an average return of 8.19% since 2013. However, Q4 usually yields the highest return, averaging 22.59%, according to CoinGlass data.

Note: This article does not offer investment advice or recommendations. Each investment and trading move poses risks, and readers should perform their own research before making decisions.

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