Since setting a new all-time high of US$4,870 on November 10, Ether (Ethereum) Prices have been at low lows for the past 50 days. If this downward trend continues, the lower trend line support indicates that the altcoin will bottom out at $3,600. Nonetheless, the derivatives data shows that professional traders are not worried about the seemingly bearish market structure.
Please note that as more and more regulatory concerns drive investors away from the industry, how the peak price has fallen within the 12-hour time frame.At the press conference on December 17, Russia Governor of the Central BankElvira Nabiullina stated that banning cryptocurrencies in the country is “very feasible”.
Nabiullina mentioned that cryptocurrencies are often used for illegal operations and the significant risks faced by retail investors.Russian President Vladimir Putin also recently criticized Cryptocurrencies say they don’t have any support. Interestingly, although the Russian ruble has fallen 44% against gold in the past four years, the country still plans to launch its own central bank digital currency.
In the U.S., a bipartisan group of U.S. senators called on Treasury Secretary Janet Yellen to clarify that the infrastructure bill Encrypted tax reporting requirements. According to the current broader definition of “broker”, miners, software developers, transaction validators, and node operators may need to report digital asset transactions worth more than $10,000 to the IRS.
Even in the presence of regulatory uncertainty and negatively skewed price movements, traders should still monitor futures contract premiums-also known as “basis spreads”-to analyze the level of bullishness or bearishness of professional traders.
Despite weak prices, professional traders remain neutral
Basis indicators measure the difference between long-term futures contracts and current spot market levels. In a healthy market, the annualized premium is expected to be 5% to 15%. This price gap is caused by sellers asking for more money to postpone the settlement time.
However, whenever the indicator disappears or becomes negative, a red alert appears, also known as “backward”.
Please note how the sharp drop after the 24% intraday plunge on December 3 caused the annualized futures premium to reach its lowest level in two months. After the initial panic, the Ethereum futures market rebounded to the current level of 9%, close to the midline of the “neutral” range.
In order to confirm whether this movement is specific to the instrument, traders should also analyze the options market. The 25% delta skew compares similar call (buy) and put (sell) options. When “fear” prevails, this indicator will turn positive because the premium of protective put options is higher than that of call options with similar risks.
When the market maker is bullish, the 25% delta skew indicator turns to the negative zone, and readings between negative 8% and positive 8% are usually considered neutral.
In the past three weeks, 25% of the delta skewness is between positive 3 and 8, which is in the neutral region. Therefore, the options market data confirms the sentiment of the futures market and shows that bullheads and market makers are not worried about recent price weakness.
If investors “shrink” a bit, they will see Ether’s year-to-date gains of 300%, which explains why professional traders are not worried about a 20% drop from the all-time high of $4,870.
In addition, the total value of the Ethereum network locked in smart contracts has doubled in the past six months to $148 billion. The data gives derivatives traders the confidence to remain calm in the current short-term price weakness.
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