According to Coinglass data, Ether’s (ETH), 12-hour closing price has been in a tight $1910 to $21,150 range for twelve consecutive days. However, these 13% oscillations have been sufficient to liquidate $495 million worth of futures contracts since May 13 according to Coinglass.
Kraken: 12-hour price in Ether/USD Source: TradingView
Digital asset investment products also saw the effects of worsening market conditions. The latest edition of CoinShare’s Digital Asset Fund Flows Report shows that crypto funds and investment products experienced a $141 Million outflow in the week ended May 20. After a $154 weekly net redemption, Bitcoin (BTC), was the focus of investors.
Russian regulation and the collapse of U.S. tech stocks increase the tension
Investor sentiment was affected by regulatory uncertainty after the May 20th publication of an updated Russian mining law proposal. The Russian parliament’s lower chamber did not contain the requirement for crypto mining operators to register or the one-year tax amnesty. Local media reported that the Duma’s legal department stated that these measures could incur federal budget costs.
The 2.5% decline in the Nasdaq Composite Index on May 24 put additional pressure on Ether’s price. The heavily tech-based indicator was also under pressure after Snap (SNAP), a social media platform, fell 40%. Snap blamed rising inflation, supply chain constraints, and labor disruptions. Meta Platforms’ (FB) shares dropped by 10%
Bears have the advantage of on-chain data and derivatives
From the previous week, the number of active addresses in the largest Ethereum network’s decentralized apps (DApps), has fallen by 27%.
The most active DApps on Ethereum network in USD terms. Source: DappRadar
Users of the network’s most popular decentralized applications saw a significant drop in usage. For example, Uniswap’s V3 weekly addresses for UNI (UNI) decreased by 24% while Curve (CRV had 52% fewer users.
Let’s take a look at Ether’s futures markets data to understand the position of professional traders, whales, and market makers.
Whales and arbitrage desks use quarterly futures because they lack a fluctuating funding rate. Fixed-month contracts trade at a slightly higher premium than spot markets. This is because sellers are willing to hold settlement for longer periods of time.
In healthy markets, these futures should trade at a premium of 5% to 12 percent annually. This is technically called “contango”, but it is not limited to crypto markets.
Futures Ether: 3-month annualized premium Source: Laevitas
Related: Bitcoin price drops to $29K per week as Nasdaq launches fresh U.S. stock dive
Ether’s futures contract premium fell below the neutral-market threshold of 5% on April 6. The current 3% basis indicator is still depressed, which indicates that leverage buyers are not convinced.
Although Ether may have gained 2% following testing the $1,910 channel resistance May 24, on-chain data indicates a lack in user growth while derivatives data points toward bearish sentiment.
The odds of the price breaking through the $2,150 resistance are low unless there is morale improvement and the Ether futures Premium regains its neutral level of 5%.
Risk is inherent in every investment or trading move. Before making any investment or trading move, you should do your research.