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Here’s why Ethereum traders might laugh at ETH’s current weakness


Since hitting an all-time high of $ 4,870 on November 10, the price of ether (ETH) has registered lower lows over the past 50 days. If this downtrend continues, the lower trendline support suggests the altcoin will bottom at $ 3,600. Still, derivatives data indicates that professional traders are not concerned about the seemingly bearish structure of the market.

Ether / USD price on FTX. Source: TradingView

Notice how the price spikes diminish over the 12 hour period as growing regulatory concerns push investors away from the sector. At a press conference on December 17, Russia’s Central Bank Governor Elvira Nabiullina said banning crypto in the country was “very doable.”

Nabiullina cited the frequent use of crypto for illegal trading and significant risk to retail investors. Russian President Vladimir Putin also recently criticized the cryptocurrency, saying it was not backed by anything. Interestingly, the country plans to launch its own central bank digital currency even as the Russian ruble has lost 44% against gold in the past four years.

In the United States, a bipartisan group of U.S. senators have asked Treasury Secretary Janet Yellen to clarify the wording of the infrastructure bill regarding crypto tax reporting requirements. Under the current broader definition of “broker,” miners, software developers, transaction validators, and node operators will likely be required to report digital asset transactions valued above $ 10,000. to the Internal Revenue Service.

Even with regulatory uncertainty and negative price movements, traders should watch the futures premium – also known as the “base rate” – to analyze how bullish or bearish professional traders are.

Pro traders are neutral despite low prices

The core indicator measures the difference between long-term futures contracts and current spot market levels. An annualized premium of 5 to 15% is expected in healthy markets. This price differential is due to the fact that sellers are asking for more money to withhold payment for longer.

However, a red alert will appear whenever this indicator fades or turns negative, also known as “pullback.” “

Base rate on 3-month ether futures. Source: Laevitas.ch

Notice how the sharp drop after the 24% intraday crash on December 3 caused the annualized term premium to hit its lowest level in two months. After the initial panic, the Ether futures market returned to the current level of 9%, which is near the middle of the “neutral” range.

To confirm if this movement was specific to this instrument, traders should also analyze the options markets. The 25% delta skew compares similar call (buy) and sell (put) options. The indicator will turn positive when “fear” prevails, as the premium of protective puts is higher than similar risky calls.

When market makers are bullish, the 25% delta asymmetry indicator goes into the negative zone, and values ​​between 8% and 8% are generally considered neutral.

30-day Ether options 25% delta asymmetry. Source: Laevitas.ch

Related: Senate hearing on stable coins: compliance anxiety and Republican retreat

Over the past three weeks, the 25% delta bias has ranged between 3 and 8 positives, which is in the neutral zone. Therefore, the options market data validates the sentiment seen in the futures markets and indicates that whales and market makers are not worried about recent price weakness.

If investors “zoom in” a bit, they will see that Ether’s year-to-date gains are 300%, which is why professional traders aren’t worried about a 20% drop from the year-to-date. at an all-time high of $ 4,870.

Additionally, the total value of the Ethereum network stuck in smart contracts has doubled in the past six months to reach $ 148 billion. This data gives derivatives traders the confidence to remain calm even with the current weakness in short-term prices.

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of TBEN. Every investment and trade move involves risk. You should do your own research before making a decision.




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