Pro Traders Turn Bears After Ethereum Price Drops to $3,200

After a 42% rally over a three-week period, Ether ( ETH ) peaked at $3,580 on April 3 and since then a 12% correction to $3,140 has taken...


After a 42% rally over a three-week period, Ether (ETH) peaked at $3,580 on April 3 and since then a 12% correction to $3,140 has taken place.

Tech giants launching their own smart contract platforms and regulatory uncertainty may have impacted investor sentiment and derivatives metrics are also showing deteriorating conditions that confirm professional traders are moving towards sentiment. bearish.

Ether/USD price on FTX. Source: Trading View

On April 6, the Financial Times reported that Meta plans to introduce virtual currency and loan services. This move aims to explore alternative revenue streams for Facebook, WhatsApp, Instagram and Messenger.

U.S. Senator Pat Toomey, a senior member of the Senate Banking Committee, has also drafted a bill proposing a regulatory framework for stablecoins. The legislation requires issuers to back up their stablecoin reserves with assets “that are cash and cash equivalents or high-quality, US dollar-denominated Tier 1 liquid assets.”

Despite Ether’s Price Correction to $3,200, Network Value Is Locked in Smart Contracts increased 13% in 30 days to $85.6 billion. Thus, it is worth considering whether the mood of derivatives traders has been affected by the recent price rejection.

Derivatives Show Ether Traders Returning Lower

To understand if the market has turned bearish, traders should look at the Ether futures premium, also known as the “base”. Unlike a perpetual contract, these fixed-timeframe futures do not have a funding rate, so their price will be very different from regular spot trades.

A trader can gauge the level of upside in the market by measuring the spend gap between futures contracts and the regular spot market.

Ether perpetual futures 8-hour funding rate. Source: Coinglass.com

Futures should trade at a 5-12% annualized premium in healthy markets. Yet, as noted above, Ether’s annualized premium has fallen from 6% on April 5 to 4.5% currently.

Related: FDIC wants US banks to report on current and planned crypto-related activities

Options markets flirt with pessimism

To rule out futures-specific externalities, traders should also analyze options markets. The 25% delta skew compares similar call (call) and put (sell) options. The measure will turn positive when fear prevails, as the protection premium of put options is higher than that of similarly risky call options.

The opposite is true when greed prevails, causing the delta asymmetry indicator to shift 25% into the negative zone.

Ether options 30 days 25% delta skew. Source: Laevitas.ch

The 25% bias indicator has been hovering between 4% and 8% since March 22, indicating balanced pricing for bullish and bearish options. However, the correction to $3,140 on April 7 caused the metric to momentarily test 9.5%, the threshold for neutral-to-bearish sentiment.

Although the current reading of 7% is still neutral, it is safe to say that professional Ether traders have become more uneasy as Ether is down 12% in four days. Currently, there is a slight bearish sentiment in the market.

Of course, none of this can predict when Ether will continue to decline, but given current derivatives data, there is less demand for leverage.

The views and opinions expressed herein are solely those of the author and do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk. You should conduct your own research when making a decision.