Ethereum price outlook weakens, but ETH derivatives suggests $1.6K is unlikely
Another top-20 U.S. bank bites the dust, but Ethereum price fails to benefit from the event.
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Značka: ETH futures
ETH derivatives show pro traders are worried about Ethereum’s $2.5K support
Ether (ETH) investors are having a rough time in 2022, with ETH accumulating 25% losses year-to-date as of March 17. Still, the cryptocurrency has bounced multiple times near $2,500 over the past couple of months, signaling a solid support level.Ether/USD price at FTX. Source: TradingViewOn March 15, Ethereum developer Tim Beiko announced that the Kiln testnet — formerly Ethereum 2.0 — successfully passed the Ethereum “Merge.” The process involves taking Ethereum’s Execution Layer from the existing proof-of-work layer and merging it with the Consensus Layer from the Beacon Chain. The end goal is to turn the blockchain into a proof-of-stake network.The United States Federal Open Market Committee (FOMC) increased interest rates to 0.50% on March 16 — the first such move since 2018. The monetary authority warned of persisting “upward pressure on inflation,” precisely the problem that cryptocurrencies’ digital scarcity aims to solve.Investors fear that further rate hikes by the FOMC could have negative consequences on risk markets. For example, a higher cost of borrowing reduces economic stimulus, creating a hurdle for businesses’ expansion and consumer spending. Regardless of its potential, Ether’s 80% historical volatility shifts most investors’ perception to see it as a risky asset that will inevitably succumb to an eventual broader market correction.Ether futures show modest sentiment improvementTo understand how professional traders are positioned, one should look at Ether’s futures and options market data. Firstly, the basis indicator measures the difference between longer-term futures contracts and the current spot market levels.The annualized premium of Ether futures should run between 5% and 12% to compensate traders for “locking in” the money for two to three months until the contract expires. Levels below 5% are extremely bearish, while numbers above 12% indicate bullishness.Ether 3-month futures’ annualized premium. Source: LaevitasThe above chart shows that Ether’s basis indicator recovered from 2% on March 13 to the current 3.5%. However, such a level falls below the 5% threshold expected on neutral markets, signaling that pro traders are far from comfortable holding ETH futures longs.Thus, one can assess that an eventual break of the $3,200 resistance will catch those investors off guard, creating strong buying activity to cover short positions.Options traders fear ETH could drop lowerEther’s daily closing price has been ranging from $2,500 to $3,000 for the past 27 days, making it difficult to discern a direction in the market. In that sense, the 25% delta skew is extremely useful, as it shows whether arbitrage desks and market makers are overcharging for upside or downside protection.If those traders fear an Ether price crash, the skew indicator will move above 10%. On the other hand, generalized excitement reflects a negative 10% skew. That is precisely why the metric is known as the pro traders’ “fear and greed” metric.Related: How professional Ethereum traders place bullish ETH price bets while limiting lossesEther 30-day options 25% delta skew: Source: LaevitasAs shown above, the skew indicator has been over 10% since March 11, indicating fear, as these options traders are overcharging for downside protection.Even though there was a modest improvement on Ether’s futures premium, the indicator remains on a bearish level. Considering the ETH options markets pricing a higher risk of downside, it is safe to conclude that professional traders are not confident that the current $2,500 support will hold.However, not everything is lost for Ether bulls, as the cheap futures premium offers the opportunity to leverage long at a low cost. As long as the Ethereum network continues to advance on solving its scalability problem, it is still possible that the $3,200 resistance gets revisited considering the global macroeconomic uncertainty and inflation.The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk. You should conduct your own research when making a decision.
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Ethereum futures premium hits a 7-month low as ETH tests the $2,400 support
Ether (ETH) reached a $3,280 local high on Feb. 10, marking a 51.5% recovery from the $2,160 cycle low on Jan. 24. That price was the lowest in six months, and it partially explains why derivatives traders’ main sentiment gauge plummeted to bearish levels.Ether’s futures contract annualized premium, or basis, reached 2.5% on Feb. 25, reflecting bearishness despite the 11% rally to $2,700. The worsening conditions depict investors’ doubts regarding the Ethereum network’s shift to a proof-of-stake (PoS) mechanism.As reported by Cointelegraph, the much-anticipated sharding upgrade that will significantly boost processing capacity should come into effect in late 2022 or early 2023. Analyzing Ether’s performance from a longer-term perspective provides a more appealing sentiment, as the cryptocurrency is currently 45% below its $4,870 all-time high.Furthermore, the Ethereum network’s adjusted total value locked (TVL) has held a reasonable 42.8 million ETH despite the price correction.Ethereum network total value locked, in ETH. Source: DefiLlamaAs shown above, the network’s TVL increased by 16.5% in three months, reflecting growth from decentralized finance (DeFi) and nonfungible token (NFT) marketplaces.However, due to network upgrade delays and worsening global macro conditions, professional traders are becoming frustrated and anxious, a sentiment that is depicted in multiple derivatives metrics.Ether futures hit their most bearish level in seven monthsRetail traders usually avoid quarterly futures due to their fixed settlement date and price difference from spot markets. However, the contracts’ biggest advantage is the lack of a fluctuating funding rate, hence the prevalence of arbitrage desks and professional traders.These fixed-month contracts usually trade at a slight premium to spot markets because sellers are requesting more money to withhold settlement longer. This situation is known technically as “contango” and is not exclusive to crypto markets.Ether futures 3-month annualized premium. Source: LaevitasFutures should trade at a 5%–15% annualized premium in healthy markets. Yet, as displayed above, Ether’s annualized premium has decreased from 20% on Oct. 21 to a meager 2.5%.Although the basis indicator remains positive, it has reached the lowest level in seven months. The crash to $2,300 on Feb. 24 caused bearish sentiment to prevail, and not even Feb. 25’s 10% recovery was enough to flip the tables.Currently, data shows few signs that bulls are ready to regain control. If this were the case, the Ether futures premium would have turned positive after such a rally.The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk. You should conduct your own research when making a decision.
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Ether drops below $3,800, but traders are unwilling to short at current levels
Even though Ether (ETH) reached a $4,870 all-time high on Nov. 10, bulls have little reason to celebrate. The 290% gains year-to-date have been overshadowed by Dec.’s 18% price drop. Still, Ethereum’s network value locked in smart contracts (TVL) increased nine-fold to $155 billion.Looking at the past couple of months’ price performance chart doesn’t really tell the whole story, and Ether’s current $450 billion market capitalization makes it one of the world’s top 20 tradable assets, right behind the two-century-old Johnson & Johnson conglomerate.Ether/USD price at FTX. Source: TradingView2021 should be remembered by the decentralized exchanges’ sheer growth, whose daily volume reached $3 billion, a 340% growth versus the last quarter of 2020. Still, crypto traders are notoriously short-sighted, accentuating the impact of the ongoing downtrend channel.Derivatives markets do not reflect panic sellingTo understand whether bearishness has been instilled, one must analyze the futures’ funding rate. Perpetual contracts, also known as inverse swaps, have an embedded rate usually charged every eight hours. Those measures are established to avoid exchange risk imbalances. A positive funding rate indicates that longs (buyers) demand more leverage.However, the opposite situation occurs when shorts (sellers) require additional leverage, and this causes the funding rate to turn negative.Ether perpetual futures 8-hour funding rate. Source: Coinglass.comAs depicted above, the eight-hour fee has been ranging near zero in December, indicating a balanced leverage demand from buyers and sellers. Had there been some panic moments, it would have been reflected on such derivatives indicators.Top traders are increasing their bullish betsExchange-provided data highlights traders’ long-to-short net positioning. By analyzing every client’s position on the spot, perpetual and futures contracts, one can better understand whether professional traders are leaning bullish or bearish.There are occasional discrepancies in the methodologies between different exchanges, so viewers should monitor changes instead of absolute figures.Exchanges top traders Bitcoin long-to-short ratio. Source: CoinglassDespite Ether’s 9% correction since Dec. 24, top traders on Binance, Huobi and OKEx have increased their leverage longs. To be more precise, Binance was the only exchange facing a modest reduction in the top traders’ long-to-short ratio. The figure moved from 0.98 to 0.92. However, this impact was more than compensated by OKEx traders increasing their bullish bets from 1.67 to 3.20 in one week.Currently, there is hardly a sense of bearishness present in the market. According to the data, pro traders are buying the dip while retail investors’ net demand for shorts (sell) hardly changed throughout the past month. Of course, none of that can predict whenever Ether will flip the current descending channel, but one might infer that there’s little interest in betting on the downside from here.The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk. You should conduct your own research when making a decision.
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