Although Ether (ETH), rejected the $2,000 resistance on August 14, the solid 82.8% gain from the rising wedge formation on July 13 seems like a victory to bulls. The “ultrasound-money” dream is closer than ever as the network expects that the Merge transaction will be converted to a proof of stake (PoS), consensus network on September 16.
Chart of the Ether price index, USD, 12 hours. Source: TradingView
Critics point out that transitioning out of proof-of work (PoW mining) has been delayed for many years and that Merge does not address scaling. The migration of the network to parallel processing (sharding), is expected to occur later in 2023 or 2024.
The EIP-1559 burn mechanism, introduced in August 2021 by crypto analyst Kris Kay, was crucial to drive ETH into scarcity.
11% staked on all $ETH supply. 2% all $ETH supplies are now burned. Only a few people have access to $ETH.
— Kris Kay | DeFi Donut (@thekriskay) August 15, 2022
Although the move to the Ethereum beacon chain was highly anticipated, there was a lot of criticism. DrBitcoinMD highlights the inability of ETH stakers withdraw their coins. This creates an unsustainable temporary reduction.
Anyone who still believes in the Russian pseudointellectuals and the Ethereum Ponzi deserve what’s next. pic.twitter.com/gjxHXdzuSK
— Doc (@DrBitcoinMD), August 11, 2022
The decreased availability of coins caused a supply shock. This was especially true after the recent 82.8% rally that Ether experienced. Despite this, investors were aware of the risks involved in ETH 2.0 staking. No promises were made regarding instant transfers post-Merge.
Option markets reflect dubious sentiment
Investors should examine Ether’s data on derivatives markets to see how arbitrage desks and whales are placed. If traders charge too much for downside or upside protection, the 25% delta skew can be a sign.
The skew indicator would rise above 12% if market participants were worried about an Ether price crash. Generalized excitement, however, reflects a negative 12 percent skew.
Ether 30-day options 25% delta-skew: Source: Laevitas.ch
Since Ether launched the rally, the skew indicator has remained neutral even though it crossed the $2,000 barrier on Aug. 14. This is somewhat concerning as ETH option traders are currently evaluating similar upside and downside price movements risks.
Similar: Ethereum ICO-era Whale Address Transfers 145,000 ETH Weeks Before the Merge
The long-to-short data also shows low confidence below the $2,000 mark. This excludes externalities that could have only impacted the options markets. This metric also collects data from clients of exchanges on spot, perpetual, and quarterly futures contracts. It provides better information about professional traders’ positions.
Sometimes there are methodological differences between exchanges. Therefore, readers should be able to monitor changes rather than absolute numbers.
Top traders in exchanges Ether long-to–short ratio Source: Coinglass
According to the long-to short indicator, professional traders have slightly decreased their leverage long positions even though Ether rallied 18% between Aug. 4 and Aug. 15. The Binance traders’ ratio showed some improvement from its 1.16 start, but it finished below its starting level of 1.12.
Huobi saw a slight decrease in its long/short ratio as it moved from 0.98 in the previous 11 days to 0.96. The metric reached its peak at 1.70 at OKX, but it only slightly rose from 1.46 on August. 4 to 1.52 Aug. 15. On average, traders weren’t confident enough to maintain their bullish leverage positions.
Despite Ether’s 18% gain since Aug. 4, there has not been any significant change in the leverage positions of whales and market makers. Options traders pricing Ether’s upside- and downside moves at similar prices is likely to be a sign of a problem. For example, strong support for the proof-of work fork would put pressure on ETH.
One thing is certain, professional traders at the moment aren’t optimistic that the $2,000 resistance can be broken.
Risk is inherent in every investment or trading move. Before making any investment or trading move, you should do your research.