Ether price (ETH) rallied 18% between February 13 and 16, but has since traded in a range near the $1,700 level. Despite the recent price improvement, Ether derivatives metrics remain neutral to bullish as investors ponder a tighter regulatory environment and the potential impact of Shanghai’s Ethereum upgrade.
The biggest worry for investors right now is regulation, especially after the UK’s Financial Stability Board (FSB) recently said that most stablecoins do not meet international standards. The entity was created by the G20 group and is affiliated with the Bank of International Settlements (BIS). FSB chairman Klaas Knot said appropriate regulation of crypto-assets should be “based on the principle of equal activity, equal risk, equal regulation”.
On a more positive note, there has been some improvement in China since the govt a softer approach to Hong Kong’s crypto hub aspiration. According to a February 20 Bloomberg report, Chinese representatives often attend Hong Kong crypto meetings to understand local crypto trading operations.
A recent Binance report detailed the state of Ether betting and explored why The Shanghai upgrade may not lead to ETH selling pressure which some traders predicted. Their rationale is based on liquid staking derivatives that allow users to profit from staked Ether while retaining the ability to sell the derivative token.
Lets look Ether derivatives data to understand if the $1,700 price rejection affected crypto investor sentiment.
ETH futures show higher demand for leveraged longs
The annualized premium on two-month futures should trade between 4% and 8% in healthy markets to cover costs and associated risks. However, when the contract trades at a discount to the regular spot markets, it shows a lack of trader confidence and is a bearish indicator.
The chart above shows that derivatives traders are no longer neutral to bearish after the Ether futures premium crossed the 4% mark. More importantly, it shows resilience even though ETH failed to hold the $1,700 support on February 21st.
Reduced demand for leveraged shorts (bears) does not necessarily mean expectations of positive price action. Marketers should analyze Ether Options Markets understand how whales and market makers value the probability of future price movements.
Options risk metrics are moving away from bearish sentiment
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 skew metric below -10%, meaning bearish put options are less desirable.
Delta skew flirted with the bearish 10% level on February 14, signaling stress from professional traders. However, the situation improved during the week with the index hovering near 0 – indicating a similar appetite for risk on the upside and downside.
Currently, the options and futures markets indicate that professional traders are moving towards neutral to bullish sentiment, showing higher chances of ETH breaking above the $1,700 resistance. As a result, the odds are in favor of Ether bulls as investors remained calm despite regulatory pressure and negative emotions surrounding the upcoming Shanghai upgrade.
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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.