After a rally of 42% over a period of three weeks, Ether (ETH), peaked at $3.580 on April 3. Since then, a 12% correction has occurred to $3.140
The launch of their smart contract platforms by tech giants and regulatory uncertainty may have affected investors’ sentiment. Derivatives metrics also indicate worsening conditions, which confirms professional traders’ shift towards a bearish mood.
Price of Ether/USD at FTX. Source: TradingView
The Financial Times reported on April 6 that Meta plans to introduce virtual currency as well as lending services. This is an attempt to explore other sources of revenue for Messenger, WhatsApp, Instagram, Instagram, and Facebook.
United States Senator Pat Toomey was the top-ranking member of the Senate Banking Committee. He also proposed a regulatory framework to stabilizecoins. The legislation requires that issuers back up their stablecoin reserve with assets. These assets must include cash and cash equivalents, or high-quality liquid assets of level 1 denominated US dollars. dollars.”
Even though Ether experienced a price correction of $3,200 to $85.6 billion, its value locked in smart contracts grew 13% in just 30 days to $85.6 trillion. It is worth investigating whether the recent price rejection affected the mood of derivatives traders.
The bearish behavior of Ether traders is evident in derivatives
The premium of Ether futures contracts, also called the “basis”, is a key indicator that traders need to understand whether or not the market has gone bearish. These fixed-calendar futures have no funding rate and are therefore not a perpetual contract. Their price will be very different from regular spot exchanges.
The expense gap between the regular spot and futures markets can be used to gauge market bullishness.
Ether perpetual futures 8 hour funding rate Source: Coinglass.com
In healthy markets, futures should trade at a premium of 5% to 12 percent annually. As you can see, Ether’s annualized Premium has fallen from 6% as of April 5th to 4.5% at the moment.
Related: The FDIC asks US banks to report current and future crypto-related activity
Options markets are prone to pessimism
Trader should also look at the options markets to exclude externalities that are not specific to futures instruments. The 25% delta skew is a comparison of similar call (buy) or put (sell) options. This metric will be positive if fear is present, as the protective put options premium for similar risk options is higher than other options.
When greed is rampant, the 25% delta-skew indicator will shift to the negative.
Ether 30-day options 25% delta-skew Source: Laevitas.ch
Since March 22, the 25% skew indicator has fluctuated between 4% to 8%, indicating equal pricing for bearish and bullish options. The metric was temporarily tested 9.5% after the April 7 correction to $3140. This is the threshold for neutral-to-bearish sentiment.
Although the current reading of 7% is neutral, it’s safe to say that Ether pro-traders became more nervous as Ether traded down by 12% in just four days. The market is currently experiencing a mild bearishness.
All of this can’t predict when Ether will continue its downtrend, but the current derivatives data suggests that there is less demand for leverage longs.
Risk is inherent in every investment or trading move. Before making any investment or trading move, you should do your research.