Home CryptocurrencyAltcoin Ethereum bears on top according to derivatives data, but for how long?

Ethereum bears on top according to derivatives data, but for how long?

by SuperiorInvest

ether (ETH) price fell 11.9% from November 20 to November 22, bottoming out at $1,074 – the lowest level since July. Currently, investors have reason to be concerned about the cryptocurrency lending company Genesis reportedly faced difficulties raising money, prompting rumors of insolvency on 21 November.

However, a spokesperson for Genesis told Cointelegraph that there are no immediate plans for bankruptcy as the company continues to negotiate with its creditors.

Then there were concerns about the centralization of decentralized finance (DeFi). Uniswap Labs has changed its privacy policy On November 17, it reveals that it collects publicly available blockchain data, user browser information, operating system data, and interactions with its service providers.

Adding to the fracas, the hacker behind FTX exchange theft of $447 million has been spotted moving its ether funds. On November 20, the attacker transferred 50,000 ETH to a separate wallet and converted it to Bitcoin using two renBTC bridges.

Traders fear that a hacker could use leveraged short bets to suppress the price of Ether to profit. The rumor was raised by @kundunsan on November 15, though the Twitter post was unknown.

Lets look Ether derivatives data to understand whether deteriorating market conditions have affected crypto investor sentiment.

Professional traders have been in panic mode since November 10th

Quarterly futures are typically avoided by retail traders because of their price differential from spot markets, but are the preferred instruments of professional traders because they avoid the volatility of funding rates often found in perpetual futures contract.

Ether 2-month futures annual premium. Source: Laevitas.ch

The annualized premium for three-month futures should trade between +4% to +8% in healthy markets to cover costs and associated risks. The chart above shows that derivatives traders have been bearish since November 10th as the Ether futures premium has been negative.

It is currently in reverse in the contracts and this situation is atypical and usually considered bearish. The metric did not improve after ETH rose 5% on November 22, reflecting the reluctance of professional traders to add leveraged long (bull) positions.

Traders should also analyze Ether Options Markets exclude externalities specific to the futures instrument.

Options traders fear further falls

A 25% delta skew is a clear sign when market makers and arbitrage tables are overbidding for upside or downside protection.

In bear markets, option investors place higher odds on a price decline, which causes the bias indicator to rise above 10%. On the other hand, bull markets tend to push the skewness indicator below -10%, which means bearish put options are discounted.

Ether 60 day options 25% delta skew: Source: Laevitas.ch

Delta skew has been above the 10% threshold since November 9, signaling that options traders have been less inclined to offer downside protection. The situation worsened in the following days when the delta skew indicator climbed above 20%.

The 60-day delta currently stands at 23%, so whales and market makers are valuing higher chances of a price drop for Ether. As a result, derivatives data shows low confidence as Ether struggles to hold the $1,100 support.

According to the data, Ether bulls should not throw in the towel just yet, as these metrics tend to look backwards. The panic that followed the FTX bankruptcy and subsequent liquidity problems at Genesis could dissipate quickly if exchanges public document on reserves and institutional investors adding exposure to Bitcoin during a downturn they are interpreted as positive by market participants.

As a result, Ether bears still have the upper hand by ETH derivative metrics at the moment.

The views, thoughts and opinions expressed herein are solely those of the authors and do not necessarily reflect or represent the views and opinions of Cointelegraph.

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