The $3000 ETH price is caught in a rut, and these three indices indicate that the downturn is far from over.
After failing to break a five-week-long declining channel top for the third time in a row, Ether (ETH) is still in difficulty. The test of the $3,000 resistance on March 2 was followed by a 17.5 percent decline over the next five days, indicating that purchasers are hesitant to defend the price.
Despite the fact that network transaction prices have reduced from $19 in mid-February to $13 now, Ether continues to suffer from excessive network transaction fees. While this is lower than prior highs, $13 per transaction is still prohibitively expensive for most games, nonfungible tokens, and even decentralized finance transactions.
The total value locked (TVL) in Ethereum fell by 55 percent on March 8, which is even more concerning than Ether’s performance. In comparison to competitors, the percentage of assets locked in its smart contracts has reached an all-time low, according to data.
This signal could help to understand why Ether has been declining since early February. But, more crucially, one must examine how professional traders are placing themselves, and derivatives markets are the best indicator.
The futures premium has remained unchanged.
The premium on Ether futures contracts, commonly known as a “basis,” can be used to determine if the present bearish trend reflects top traders’ mood. These fixed-calendar futures, unlike perpetual contracts, do not have a funding rate, hence their pricing will be very different from conventional spot markets.
A trader can determine the extent of bullishness in the market by comparing the expense gap between futures and the normal spot market. Bearish emotion, on the other hand, causes the three-month futures contract to trade at a 5% annualized premium or lower (basis).
A neutral market, on the other hand, should have a 5% to 15% basis, suggesting market players’ hesitancy to lock in Ether for a low price until the trade settles.
The accompanying chart illustrates that Ether’s futures premium bottomed near 1.5 percent on February 28, a level often linked with moderate pessimism. Despite the small increase to the current 3% basis, futures market participants are wary of taking leveraged long (purchase) bets.
The lack of excitement is confirmed by long-to-short statistics.
Externalities that may have impacted longer-term futures instruments are not included in the top traders’ long-to-short net ratio. The positions of these top clients on spot, perpetual, and futures contracts can be used to determine if professional traders are bullish or bearish.
Because there are sometimes methodological differences between different exchanges, observers should keep an eye on changes rather than absolute data.
Surprisingly, ETH’s price was extremely close to the current $2,600 when Ether’s futures premium bottomed out at 1.5 percent on Feb. 28. As a result, comparing the long-to-short ratio of the top traders throughout this time span makes sense.
On February 8 and March 8, Binance showed the same level of top traders’ Ether positions at 0.92. These whales and market markers at Huobi and OKX, on the other hand, effectively cut their long positions. The long-to-short ratio at Huobi, for example, has dropped from 1.07 to 1.00. Furthermore, the present 1.47 ratio of OKX traders is lower than the 1.58 ratio of eight days ago.
All of the evidence leads to a worsening of the situation.
From the standpoint of the criteria outlined above, there is little reason to believe that the price of Ether will become bullish in the near future. As evidenced by the basis rate and long-to-short ratio, professional traders are hesitant to add long positions.
Furthermore, the TVL data does not support a significant Ethereum smart contract utilization indicator. Losing ground to competitors while postponing the transition to a proof-of-stake solution is likely to divert investors’ focus away from the company and make long-term investors uneasy.
Disclaimer: These are the writer’s opinions and should not be considered investment advice. Readers should do their own research.