Ethereum Futures and Options Data Reflects Traders’ Mixed Emotions Over $ 3.2,000 ETH Price

Ether (ETH) has been an emotional roller coaster for the past three months, mainly because its price has increased twice. First, it peaked at $ 4,870 on November 10 and $ 4,780 on December 1. However, the double top was quickly followed by a harsh rejection that led to $ 490 million in long term futures closeouts within 48 hours.

Once again, hope was instilled on December 8 after Ether started climbing 28.5% in 4 days to retest $ 4,400 support. Shortly thereafter, the downtrend continued, leading to the low of $ 2,900 on January 10, which was the lowest ETH price seen in 102 days. This low marked a 40% low from the all-time high of $ 4,870 and left traders wondering if a bear market has been established.

Ether / USD price at FTX. Source: TradingView

One could argue that Ether is simply tracking Bitcoin’s 42% correction from an all-time high on November 10 at $ 69,000 and that the most recent pullback was in part attributed to the Federal Reserve’s potentially tighter monetary policies. United States and the impact of political unrest in Kazakhstan on mining.

This simplistic analysis leaves crucial developments behind, like China’s official digital yuan wallet which became the most downloaded app in local mobile app stores on January 10. Additionally, a pilot version of the country’s central bank digital currency (CBDC) is being used in some cities and it also became available for download from app stores on January 4.

Even with fiscal policy pressure and negatively biased price action, traders should still watch the futures premium (base rate) to analyze how bullish or bearish professional traders are.

Futures traders are increasingly anxious

The core indicator measures the difference between long-term futures contracts and current spot market levels. An annualized premium of 5 to 15% is expected in healthy markets. This price difference is due to the fact that sellers are asking for more money to withhold payment for longer.

However, a red alert appears whenever this indicator fades or turns negative, a scenario known as a “pullback.” “

Base rate on 3-month ether futures. Source: Laevitas.ch

Notice how the indicator peaked at 20% on November 8 as Ether broke above $ 4,800, but then gradually faded to an 8% low on December 5 after the ETH flash crashed at 3 $ 480. More recently, as Ether hit a low of $ 2,900 on January 10, the base rate fell to 7%, which is its lowest level in 132 days.

Therefore, professional Ether traders are uneasy despite the 10% rally to $ 3,200 on January 11.

Options traders recently went neutral

To exclude the externalities specific to the futures instrument, it is also necessary to analyze the options markets. The 25% delta skew compares similar call (buy) and sell (put) options. The metric will turn positive when fear prevails, as the premium of protective puts is higher than similar risky calls.

The reverse is true when greed is the dominant mood, causing the 25% delta asymmetry indicator to go into the negative zone.

30-day Ether options 25% delta asymmetry. Source: TradingView

When market makers and whales are bearish, the 25% delta asymmetry indicator goes into the positive zone and readings between 8% and 8% are generally considered neutral.

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Ether options traders entered fear mode on January 8 as the 25% delta skew broke the 8% threshold, peaking at 11% two days later. However, the rapid rebound from the $ 2,900 low instilled confidence in Ether options traders and also moved the “fear and greed” options metric to a measly 3%.

At the moment there is no consensus on the sentiment of Ether traders as the futures markets indicate slight dissatisfaction and options arbitrage bureaus and whales have recently abandoned their bearish stance. This makes sense as the current price of $ 3,200 still reflects the recent weekly 15% drop and is far from exciting.

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of TBEN. Every investment and trade move involves risk. You should do your own research before making a decision.