Market sentiment remains cautious ahead of the May 7 Ethereum Pectra upgrade, but optimism is beginning to return

Traders remain cautious about ETH's price action, but optimistic sentiment is beginning to return. The May 7, Ethereum Pectra upgrade could boost investor sentiment.

Key takeaways:

* Traders remain cautious about ETH’s price action, but optimistic sentiment is beginning to return with the May 7, Pectra upgrade on the horizon.

* Despite the upcoming upgrade, ETH’s price action shows investors are still hesitant to open new positions, and new institutional products like the Ethereum ETF have yet to spark significant interest.

* Professional traders are now more comfortable with downside risks, but current derivatives data does not reflect a bullish outlook for ETH at these price levels.

Ether (ETH) has traded below $1,900 since March 15, leading some investors to wonder if the failed attempt to reclaim $4,000 in December 2024 signaled the end of an era for the leading altcoin.

Concerns continue to mount as professional traders are still largely cautious about ETH’s price outlook, especially considering that monthly futures should trade at a 5% or more premium compared to spot markets to compensate for the longer settlement period. However, this indicator has remained below the neutral threshold throughout the past 12 weeks.

Part of the lack of enthusiasm may stem from disappointment with the lack of attention from the United States government. Back in March 6, 2024, part of President Trump’s “Digital Asset Stockpile” Executive Order classified altcoins like Solana (SOL), BNB, Cardano (ADA), and Tron (TRX).

The Trump administration decided that only Bitcoin (BTC) was significant enough to be included in its own “Strategic Reserve.” In practical terms, this would allow the government to retain any altcoins it currently holds but not acquire new ones.

Coinhelper.io data shows that, for the first time ever, in April 2025, Ether’s market capitalization fell below the combined value of its four largest rivals.

After rebounding from lows near $1,400, Ether’s total market capitalization now stands at $217 billion, which is enough to put it ahead of the combined value of its four main competitors.

However, unless Ether consistently outperforms these rivals, sentiment is unlikely to improve. Some traders have high hopes for the upcoming ‘Pectra’ network upgrade, but current derivatives data does not reflect a bullish outlook.

Ether’s decline has also coincided with weak demand for the Ethereum spot exchange-traded fund (ETF) in the United States.

Institutional interest has been lacking despite ETH’s price surging from $2,400 to $4,000 between October and December 2024. In contrast, Bitcoin ETFs saw assets more than double, growing from $50 billion in October 2024 to $110 billion currently.

Although Ethereum remains dominant in terms of total value locked (TVL), it has struggled to match Solana’s integrated user experience or Tron’s (TRX) dominance in the stablecoin sector.

Traders appear uninterested in Ethereum’s higher decentralization or improved security, especially for activities involving frequent deposits and withdrawals, where layer-2 solutions provide limited benefits.

The absence of demand for leveraged bullish ETH positions does not necessarily mean that professional traders expect further price declines. If whales and market makers were unwilling to offer downside protection, this would be reflected in the ETH options markets, signaling an increased risk of a market downturn.

Contrary to some expectations, put (sell) options are being priced at levels similar to those of call (buy) options, and professional traders are now more comfortable with downside risks than they were two weeks ago. While ETH derivatives are not signaling strong bullish sentiment, they also do not suggest that professional traders are worried about further declines at current price levels.

There is a chance that the upcoming ‘Pectra’ network upgrade could affect Ether’s price. Scheduled for May 7, this event might renew investor interest in the project by closing the gap with some of its competitors.

Pectra will introduce new staking mechanisms that could be appealing to institutional investors, potentially resulting in more ETH being locked in validator nodes, which in turn would reduce the circulating supply.

Historically, Ethereum upgrades have often been associated with brief spikes in ETH’s price. For instance, following the successful integration of the optimistic rollup technology in August 2024, Ether’s price displayed a brief 10% surge from $3,000 to $3,300.