According to derivatives, the price of Ether has been sideways for 27 days, but pro traders are sceptical of the $2,500 support.
Investors in Ether (ETH) are having a difficult time in 2022, with ETH down 25% year-to-date as of March 17. Nonetheless, the cryptocurrency has bounced several times near $2,500 in recent months, indicating a strong support level.
Tim Beiko, an Ethereum developer, revealed on March 15 that the Kiln testnet — formerly Ethereum 2.0 — had survived the Ethereum “Merge.” The procedure entails combining Ethereum’s Execution Layer from the existing proof-of-work layer with the Beacon Chain’s Consensus Layer. The ultimate goal is to convert the blockchain to a proof-of-stake system.
On March 16, the Federal Open Market Committee (FOMC) of the United States raised interest rates to 0.50 percent, the first time since 2018. The central bank warned of continued “inflationary pressures,” which is exactly the problem that cryptocurrencies’ digital scarcity attempts to alleviate.
Investors are concerned that more rate hikes by the FOMC will have a detrimental impact on risk markets. A higher cost of borrowing, for example, diminishes economic stimulation, putting a stumbling block in the way of corporate expansion and consumer expenditure.
Regardless of its promise, Ether’s historical volatility of 80% has caused most investors to view it as a dangerous asset that would inevitably fall to a bigger market slump.
Futures for ether show a little improvement in sentiment.
Look at Ether’s futures and options market statistics to see how professional traders are positioning themselves. To begin, the basis indicator analyses the difference between the current spot market values and longer-term futures contracts.
To compensate traders for “locking in” the money for two to three months until the contract expires, the annualised premium on Ether futures should be between 5% and 12%. Levels below 5% are considered negative, whereas entire numbers more than 12% are bullish.
The graph above shows that Ether’s base indicator has recovered from 2% on March 13 to 3.5 percent now. However, this figure is below the 5% threshold expected on neutral markets, indicating that professional traders are wary of longing ETH futures.
As a result, a break of the $3,200 resistance will catch those investors off guard, resulting in a flurry of purchases to cover short positions.
Option traders are concerned that ETH will fall in value.
For the previous 27 days, Ether’s daily closing price has fluctuated between $2,500 and $3,000, making it difficult to predict market direction. The 25 percent delta skew is particularly valuable in this regard, as it reveals if arbitrage desks and market makers are overcharging for upside or downside protection.
The skew indicator will rise above 10% if those traders fear an Ether price fall. Generalised excitement, on the other hand, has a negative ten percent skew. That is why the statistic is regarded as the “fear and greed” metric among professional traders.
Since March 11, the skew indicator has been above 10%, signalling concern, since these options traders are overcharging for downside protection.
Even though the futures premium for Ether has improved slightly, the indication is still bearish. Professional traders are not sure that the current $2,500 support will hold, as seen by the ETH options markets pricing a larger risk of downside.
However, Ether bulls are not completely out of luck, as the low futures premium allows them to leverage long at a low cost. Given the global financial uncertainties and inflation, it’s feasible that the $3,200 resistance may be revisited as long as the Ethereum network makes progress in overcoming its scalability problem.
Disclaimer: These are the writer’s opinions and should not be considered investment advice. Readers should do their own research.
