Global investment firm VanEck is preparing to roll out an Ethereum (ETH) futures exchange-traded fund (ETF) amid an optimistic outlook for the first-ever US futures ETF based on the second-largest crypto asset by market cap. In a statement published on Thursday, the firm says the VanEck Ethereum Strategy ETF (EFUT) will not directly invest in […]
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Ethereum spot ETF request, Ripple’s potential win against the SEC, and growing decentralized app dominance retain hope for ETH investors.
Ether (ETH) has seen a 36% year-to-date increase in its price in 2023 in U.S. dollar terms. This recovery, however, is modest given that ETH is currently trading 66% below its November 2021 peak of $4,870.
Moreover, on Sept. 20, Ether reached its lowest levels against Bitcoin (BTC) in 14 months, breaching the critical 0.06 BTC support. This has raised questions among Ether investors about the factors behind this price decline and what it will take to reverse the trend.
ETH buyers placed their biggest hopes on protocol upgrades that significantly reduced the need for new coin issuance when the network transitioned to a Proof-of-Stake consensus mechanism.
These hopes were realized in mid-September 2022, resulting in an annualized issuance rate of just 0.25% of the supply. This transformation aligned with the Ethereum community's vision of "ultrasound money."
Furthermore, the subsequent Shapella upgrade on April 12 allowed for withdrawals from the native staking protocol, addressing a major concern for investors. Previously, both the 32 ETH deposits and the yield from participating in the network consensus were locked up indefinitely.
Confidence among Ethereum enthusiasts grew as these significant hurdles were crossed with minimal issues. They anticipated that the price of Ether would surpass $2,000, a prediction that came true on April 14.
However, this optimism was short-lived, as ETH's price promptly fell back to the same $1,850 level just a week later.
Notably, instead of witnessing a net withdrawal, Ethereum staking experienced a net inflow of 3.1 million ETH in the 30 days following the Shappela upgrade, surpassing even the most optimistic expectations.
Given that the Ethereum network's planned developments have generally been on track, albeit with the customary delays, investors now need to explore other potential catalysts for reversing the current downtrend in Ether's price relative to BTC.
One of these potential catalysts lies in the ongoing legal battle between Ripple (formerly Ripple Labs) and the U.S. Securities and Exchange Commission (SEC), which could significantly impact Ether's price momentum.
The SEC contends that XRP sales to retail investors constitute a security offering. However, in July, Judge Analisa Torres ruled that XRP generally does not qualify as a security under SEC guidelines, especially when distributed through exchanges.
As noted by the "American Lawyer and Bitcoiner" Bryan Jacoutot on a social network, the Ethereum Foundation remains exposed due to the pre-sale of ETH directed toward institutional investors and subject to a lock-up period.
(1/12) ANALYSIS: I've reviewed the district court ruling on XRP and it rests on very shaky ground. Expect an appeal.
— Bryan Jacoutot (@BryanJacoutot) July 13, 2023
AND Ethereum Foundation remains at risk even if its upheld because of important distinctions in the methods used by Ripple to sell the "pre-mine"
⬇️⬇️
According to Jacoutot, even if Ripple were to secure a favorable outcome, it wouldn't immediately mitigate the risks for Ethereum. Nevertheless, it's undeniable that the regulatory uncertainty surrounding the Ether ICO remains a source of concern for investors.
On Sep. 20, an Ethereum address associated with the ICO era showed its first activity, transferring 32.1 ETH (valued at $52,000 at the time) directly to Coinbase. This additional movement only amplified regulatory concerns since there are no apparent incentives for addresses that have remained dormant for four to eight years to divest at this particular point in the market cycle.
An Ethereum ICO participant who has been dormant for 8 years transferred 32.1 $ETH to #Coinbase just now.
— Lookonchain (@lookonchain) September 20, 2023
The address received 200 $ETH at Ethereum Genesis.
And the address appears to be related to shemnon.eth (@shemnon).https://t.co/nj5eF8iRT0 pic.twitter.com/6Viytn4dU5
A similar occurrence unfolded with an address linked to Vitalik Buterin, which sent 300 ETH (worth $490,000 at the time) to the Kraken exchange on Sep. 19.
On the news side, Ethereum has seen some positive surprises, such as the unexpected request for a spot Ether exchange-traded fund (ETF) by ARK Invest and 21Shares on Sep. 6. This development reduced the risks associated with excessive institutional concentration in Bitcoin, particularly if the ETF is approved.
Additionally, Canto, a layer-1 Cosmos-native blockchain, announced its migration to Ethereum's layer-2 on Sep. 18. This Zero-Knowledge, permissionless rollup, compatible with the Ethereum Virtual Machine (EVM), is primarily focused on bringing traditional finance into the Ethereum ecosystem.
Should Bitcoin's price surge be driven solely by the approval of a spot Bitcoin ETF or inflation concerns in the U.S., Ether is well-positioned to follow suit, benefiting from the same catalysts.
Meanwhile, Ethereum's primary competitors in the decentralized applications sector, namely Solana (SOL) and BSC Chain (BNB), face similar risks pertaining to ICO and securities regulations, making it unlikely for them to challenge Ethereum's dominance in terms of total value locked, or TVL, and trading volumes.
This article is for general information purposes and is not intended to be and should not be taken as legal or investment advice. The views, thoughts, and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.
Another top-20 U.S. bank bites the dust, but Ethereum price fails to benefit from the event.
Ether (ETH) price has shown weakness after failing to break above the $1,950 resistance on April 26. The subsequent correction drove ETH to $1,810 on May 1, nearing its lowest level in four weeks. Curiously, the movement happened while the First Republic Bank (FRB) was closed by the California Department of Financial Protection and Innovation.
Curiously, the movement happened while the First Republic Bank (FRB) was closed by the California Department of Financial Protection and Innovation.
The Federal Deposit Insurance Corporation (FDIC) entered into a purchase and assumption agreement with JPMorgan to protect FRB depositors, estimating a $13 billion loss.
Regarding this latest major U.S. bank failure, UBS analyst Erika Najarian stated,
"This deal does not change the rates, recession, and regulatory headwinds that regional banks are facing."
Curiously, the VIX indicator, which measures how traders are pricing the risks of extreme price oscillations for the S&P 500 index, reached its lowest level in 18 months at 15.6% on May 1.
It is worth noting that overconfidence is the main driver for surprise moves and large liquidations in derivatives markets, meaning low volatility does not necessarily precede periods of price stability.
The economic environment has worsened significantly after the U.S. reported its first quarter gross domestic product (GDP) growth of 1.1%, below the 2% market consensus. Meanwhile, inflation in Germany remained exceptionally high at 7.6% year-over-year in April. Investors are now pricing higher odds of a global recession as the U.S. Federal Reserve is expected to raise interest rates above 5% on May 3.
Meanwhile, inflation in Germany remained exceptionally high at 7.6% year-over-year in April. Investors are now pricing higher odds of a global recession as the U.S. Federal Reserve is expected to raise interest rates above 5% on May 3.
According to fundamental macro analyst Lyn Alden, the U.S. Treasury is now targeting $1.4 trillion in new net borrowing between April and September 2023 as tax receipts have been running below expectations.
The U.S. Treasury updated their borrowing estimates.
— Lyn Alden (@LynAldenContact) May 1, 2023
They target over $1.4 trillion in net new borrowing during the two quarters from April through September 2023, with an ending cash balance target of $600 billion.
Tax receipts have been coming in below their expectations. pic.twitter.com/qnA6QFqx4m
If the U.S. debt level continues to increase while interest rates remain high, the government will be forced to increase debt payments, further pressuring its delicate fiscal situation. Such a situation should be positive for scarce assets, but what can Ethereum derivatives metrics tell us about professional traders’ risk appetite? Let's take a look.
Ether quarterly futures are popular among whales and arbitrage desks, and they typically trade at a slight premium to spot markets, indicating that sellers are asking for more money to delay settlement for a longer period.
As a result, futures contracts on healthy markets should trade at a 5% to 10% annualized premium — a situation known as contango, which is not unique to crypto markets.
Since April 19, the Ether futures premium has been stuck near 2%, indicating that professional traders are unwilling to flip neutral despite ETH price testing $1,950 resistance on April 26.
The absence of demand for leverage longs does not always imply a price decline. As a result, traders should investigate Ether's options markets to learn how whales and market makers value the likelihood of future price movements.
Related: Venmo will enable fiat-to-crypto payments in May
The 25% delta skew indicates when market makers and arbitrage desks overcharge for upside or downside protection.
In bear markets, options traders increase their odds of a price drop, causing the skew indicator to rise above 8%. Bullish markets, on the other hand, tend to drive the skew metric below -8%, indicating that bearish put options are in less demand.
The 25% skew ratio is currently at 1 as protective put options are trading in line with the neutral-to-bullish calls. That's a bullish indicator given the six-day 7.8% correction since ETH price failed to break the $1,950 resistance.
So far, Ethereum's price has failed to display strength while the baking sector created a giant opportunity for decentralized financial systems to showcase its transparency and resilience versus traditional markets. On the other hand, derivatives metrics show no sign of extreme fear or leveraged bearish bets, indicating low odds of retesting the $1,600 support in the near term.
This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.
Ether’s price has been sideways for 27 days, but pro traders are not confident about the $2,500 support, according to derivatives.
Ether (ETH) investors are having a rough time in 2022, with ETH accumulating 25% losses year-to-date as of March 17. Still, the cryptocurrency has bounced multiple times near $2,500 over the past couple of months, signaling a solid support level.
On March 15, Ethereum developer Tim Beiko announced that the Kiln testnet — formerly Ethereum 2.0 — successfully passed the Ethereum “Merge.” The process involves taking Ethereum’s Execution Layer from the existing proof-of-work layer and merging it with the Consensus Layer from the Beacon Chain. The end goal is to turn the blockchain into a proof-of-stake network.
The United States Federal Open Market Committee (FOMC) increased interest rates to 0.50% on March 16 — the first such move since 2018. The monetary authority warned of persisting “upward pressure on inflation,” precisely the problem that cryptocurrencies’ digital scarcity aims to solve.
Investors fear that further rate hikes by the FOMC could have negative consequences on risk markets. For example, a higher cost of borrowing reduces economic stimulus, creating a hurdle for businesses’ expansion and consumer spending.
Regardless of its potential, Ether’s 80% historical volatility shifts most investors’ perception to see it as a risky asset that will inevitably succumb to an eventual broader market correction.
To understand how professional traders are positioned, one should look at Ether’s futures and options market data. Firstly, the basis indicator measures the difference between longer-term futures contracts and the current spot market levels.
The annualized premium of Ether futures should run between 5% and 12% to compensate traders for “locking in” the money for two to three months until the contract expires. Levels below 5% are extremely bearish, while numbers above 12% indicate bullishness.
The above chart shows that Ether’s basis indicator recovered from 2% on March 13 to the current 3.5%. However, such a level falls below the 5% threshold expected on neutral markets, signaling that pro traders are far from comfortable holding ETH futures longs.
Thus, one can assess that an eventual break of the $3,200 resistance will catch those investors off guard, creating strong buying activity to cover short positions.
Ether’s daily closing price has been ranging from $2,500 to $3,000 for the past 27 days, making it difficult to discern a direction in the market. In that sense, the 25% delta skew is extremely useful, as it shows whether arbitrage desks and market makers are overcharging for upside or downside protection.
If those traders fear an Ether price crash, the skew indicator will move above 10%. On the other hand, generalized excitement reflects a negative 10% skew. That is precisely why the metric is known as the pro traders’ “fear and greed” metric.
Related: How professional Ethereum traders place bullish ETH price bets while limiting losses
As shown above, the skew indicator has been over 10% since March 11, indicating fear, as these options traders are overcharging for downside protection.
Even though there was a modest improvement on Ether’s futures premium, the indicator remains on a bearish level. Considering the ETH options markets pricing a higher risk of downside, it is safe to conclude that professional traders are not confident that the current $2,500 support will hold.
However, not everything is lost for Ether bulls, as the cheap futures premium offers the opportunity to leverage long at a low cost. As long as the Ethereum network continues to advance on solving its scalability problem, it is still possible that the $3,200 resistance gets revisited considering the global macroeconomic uncertainty and inflation.
The views and opinions expressed here 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.
ETH price dropped 30% in two weeks, and derivatives data shows pro traders are bearish even with Feb. 25’s rally back toward $2,800.
Ether (ETH) reached a $3,280 local high on Feb. 10, marking a 51.5% recovery from the $2,160 cycle low on Jan. 24. That price was the lowest in six months, and it partially explains why derivatives traders’ main sentiment gauge plummeted to bearish levels.
Ether’s futures contract annualized premium, or basis, reached 2.5% on Feb. 25, reflecting bearishness despite the 11% rally to $2,700. The worsening conditions depict investors’ doubts regarding the Ethereum network’s shift to a proof-of-stake (PoS) mechanism.
As reported by Cointelegraph, the much-anticipated sharding upgrade that will significantly boost processing capacity should come into effect in late 2022 or early 2023.
Analyzing Ether’s performance from a longer-term perspective provides a more appealing sentiment, as the cryptocurrency is currently 45% below its $4,870 all-time high.
Furthermore, the Ethereum network’s adjusted total value locked (TVL) has held a reasonable 42.8 million ETH despite the price correction.
As shown above, the network’s TVL increased by 16.5% in three months, reflecting growth from decentralized finance (DeFi) and nonfungible token (NFT) marketplaces.
However, due to network upgrade delays and worsening global macro conditions, professional traders are becoming frustrated and anxious, a sentiment that is depicted in multiple derivatives metrics.
Retail traders usually avoid quarterly futures due to their fixed settlement date and price difference from spot markets. However, the contracts’ biggest advantage is the lack of a fluctuating funding rate, hence the prevalence of arbitrage desks and professional traders.
These fixed-month contracts usually trade at a slight premium to spot markets because sellers are requesting more money to withhold settlement longer. This situation is known technically as “contango” and is not exclusive to crypto markets.
Futures should trade at a 5%–15% annualized premium in healthy markets. Yet, as displayed above, Ether’s annualized premium has decreased from 20% on Oct. 21 to a meager 2.5%.
Although the basis indicator remains positive, it has reached the lowest level in seven months. The crash to $2,300 on Feb. 24 caused bearish sentiment to prevail, and not even Feb. 25’s 10% recovery was enough to flip the tables.
Currently, data shows few signs that bulls are ready to regain control. If this were the case, the Ether futures premium would have turned positive after such a rally.
The views and opinions expressed here 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.
Ethereum network saw a nine-fold increase in its smart contract deposits, but a descending channel continues to pressure the price.
Even though Ether (ETH) reached a $4,870 all-time high on Nov. 10, bulls have little reason to celebrate. The 290% gains year-to-date have been overshadowed by Dec.'s 18% price drop. Still, Ethereum's network value locked in smart contracts (TVL) increased nine-fold to $155 billion.
Looking at the past couple of months' price performance chart doesn't really tell the whole story, and Ether's current $450 billion market capitalization makes it one of the world's top 20 tradable assets, right behind the two-century-old Johnson & Johnson conglomerate.
2021 should be remembered by the decentralized exchanges' sheer growth, whose daily volume reached $3 billion, a 340% growth versus the last quarter of 2020. Still, crypto traders are notoriously short-sighted, accentuating the impact of the ongoing downtrend channel.
To understand whether bearishness has been instilled, one must analyze the futures' funding rate. Perpetual contracts, also known as inverse swaps, have an embedded rate usually charged every eight hours. Those measures are established to avoid exchange risk imbalances. A positive funding rate indicates that longs (buyers) demand more leverage.
However, the opposite situation occurs when shorts (sellers) require additional leverage, and this causes the funding rate to turn negative.
As depicted above, the eight-hour fee has been ranging near zero in December, indicating a balanced leverage demand from buyers and sellers. Had there been some panic moments, it would have been reflected on such derivatives indicators.
Exchange-provided data highlights traders' long-to-short net positioning. By analyzing every client's position on the spot, perpetual and futures contracts, one can better understand whether professional traders are leaning bullish or bearish.
There are occasional discrepancies in the methodologies between different exchanges, so viewers should monitor changes instead of absolute figures.
Despite Ether's 9% correction since Dec. 24, top traders on Binance, Huobi and OKEx have increased their leverage longs. To be more precise, Binance was the only exchange facing a modest reduction in the top traders' long-to-short ratio. The figure moved from 0.98 to 0.92. However, this impact was more than compensated by OKEx traders increasing their bullish bets from 1.67 to 3.20 in one week.
Currently, there is hardly a sense of bearishness present in the market. According to the data, pro traders are buying the dip while retail investors' net demand for shorts (sell) hardly changed throughout the past month. Of course, none of that can predict whenever Ether will flip the current descending channel, but one might infer that there's little interest in betting on the downside from here.
The views and opinions expressed here 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.
Ethereum price appears en-route to a new all-time high, but data shows retail and pro investors are slightly skeptical about the current rally.
Today Ether (ETH) price briefly touched $4,760, exciting investors and reminding the world that the altcoin is a mere 2.2% below the $4,870 all-time high reached 20 days ago. While the spot price action might be intriguing, let’s see what’s happening in Ether’s derivatives markets.
While it is possible to draw a descending channel that shows support at $3,960, today's 5.4% positive move seems decoupled from Bitcoin's (BTC) negative performance.
Earlier today, commodities and stocks took a hit after the U.S. Federal Reserve acknowledged that inflation is more than just a "transitory" trend and Fed chair Jerome Powell said that the bank's relaxed money policies could end sooner than anticipated.
To understand how confident traders are about Ether's price recovery, one should analyze the perpetual contracts futures data. This instrument is the retail traders' preferred market because its price tends to track the regular spot markets.
In any futures contract trade, longs (buyers) and shorts (sellers) are matched at all times, but their leverage varies. Consequently, exchanges will charge a funding rate to whichever side demands more leverage, and this fee is paid to the opposing side.
Neutral markets tend to display a 0% to 0.03% positive funding rate which is equivalent to 0.6% per week. This indicates that longs are the ones paying and data shows retail traders have been mostly neutral since Nov. 4 and the last move above 0.07% happened on Oct. 21.
Exchange-provided data highlights traders' long-to-short net positioning. By analyzing every client's position on the spot, perpetual and futures contracts, one can better understand whether professional traders are leaning bullish or bearish.
There are occasional discrepancies in the methodologies between different exchanges, so viewers should monitor changes instead of absolute figures.
Despite Ether's 17% rally over the past four days, top traders at Huobi and OKEx decreased their longs. This move was even more evident at OKEx because the indicator made a drastic move from favoring bulls by 120% on Nov. 25 to a meager 30% advantage three days later.
Currently, data indicates that whales and arbitrage desks have reduced their long exposure, while retail traders remain suspicious of the recent bull run.
The views and opinions expressed here 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.
On Tuesday, the world’s largest financial derivatives exchange, Chicago Mercantile Exchange (CME) Group, announced the upcoming launch of ethereum-based micro futures slated to be listed on December 6. The launch follows CME Group’s bitcoin micro futures listing in May, which saw 100,000 micro bitcoin futures traded during the first six days after launch. CME to […]
Ether futures are currently trading at a premium as investors make the switch from Bitcoin-based products.
American multinational investment bank JPMorgan has revealed that institutional investors are starting to shy away from Bitcoin futures in favor of Ether derivatives.
In a note to investors on Sept. 22, analysts at the Wall Street bank said that Bitcoin futures on the Chicago Mercantile Exchange (CME) have traded at a discount compared to spot BTC prices during September.
As a consequence, Ethereum-based products have grown in popularity as investors made the switch to the world’s second-largest crypto asset. The analysts commented that there has been a “strong divergence in demand,” before adding:
“This is a setback for Bitcoin and a reflection of weak demand by institutional investors that tend to use regulated CME futures contracts to gain exposure to Bitcoin,”
When demand is high, BTC futures usually trade at a premium over the spot markets due to high BTC storage costs and enticing yields for passive crypto investing, the analysts added.
According to CME data, the 21-day average ETH futures premium rose to 1% over Ether prices on the spot markets. “This points to much healthier demand for Ethereum vs. Bitcoin by institutional investors,” commented the JPM analysts.
According to Skew Analytics, Binance is the industry leader for BTC futures volumes with $20 billion traded over the past 24 hours. OKEx is second with $5.36 billion and CME has just $2.34 billion traded over the past 24 hours by comparison. Binance also dominates for ETH futures with a daily volume of $9.7 billion.
Somewhat ironically JPM’s take on crypto futures emerged on the same day a motion was filed in a Manhattan federal court ordering JPMorgan to pay $16 million to Treasury futures investors for creating false demand, or “spoofing”. According to Law360, the move follows the bank’s $920 million criminal settlement with the U.S. Department of Justice in September 2020 for manipulating commodities futures markets.
Related: JPMorgan now offers clients access to six crypto funds … but only if they ask
In other institutional adoption news, two trust funds based on Bitcoin and Ethereum have been launched by California-based Cambrian Asset Management. The institutional investment products will offer exposure to the underlying assets but cut out some of the volatility according to Bloomberg.
The firm’s flagship crypto hedge fund, which trades 50 digital assets, has gained 76% this year through August, whereas BTC itself had gained 62% in the first 8 months of the year.
ETH might have rallied 35% off its $1,750 low but derivatives data shows pro traders are not so bullish.
Ether (ETH) rallied 35% over the past ten days and reclaimed the critical $2,300 support, but the crucial $2,450 local top hasn't been tested since June 17. Part of the recent recovery can be attributed to the London hard fork, which is expected to go live on Aug. 4.
Traders and investors view the EIP-1559 launch as a bullish factor for Ether price because it is expected to reduce gas fees. However, Ether miners are not thrilled with the proposal because the proof-of-work model will no longer be necessary after ETH2.0 goes live.
The network fees will automatically be set, although users can choose to pay extra for faster confirmation. Miners (or validators in the future) will receive this additional fee, but the base fee will be burned. In a nutshell, Ether is expected to become deflationary.
While it's difficult to identify the main drivers of the recent rally, it is possible to gauge professional traders' sentiment by analyzing derivatives metrics.
If the recent price move was enough to instill confidence, the futures contracts premium and options skew should clearly reflect this change.
By analyzing the price difference between futures contracts and regular spot markets, one can better understand the prevalent sentiment among professional traders.
The 3-month futures should trade with a 6% to 14% annualized premium on neutral to bullish markets, which is in line with stablecoins' lending rate. By postponing settlement, sellers demand a higher price, and this causes the premium.
Whenever the futures premium fades or turns negative, it raises an alarming red flag. This situation is also known as backwardation and indicates that there is bearish sentiment.
The above chart shows that the Ether futures premium flipped negative on July 20 as Ether tested the $1,750 support. However, even the massive rally up to $2,450 wasn't enough to bring the September contract premium above 1.3%, equivalent to 8% annualized.
Had there been some excitement, the annualized futures premium would have been at 12% or higher. Therefore, the stance of professional traders seems neutral right now and is flirting with bearishness.
To exclude externalities exclusive to the futures instrument, traders should also analyze options markets.
Whenever market makers and whales lean bullish, they will demand a higher premium on call (buy) options. This move will cause the 25% delta skew indicator to shift negatively.
On the other hand, whenever the downside protection (put option) is more costly, the 25% delta skew indicator will become positive.
Readings between negative 10% and positive 10% are usually deemed neutral. The indicator had been signaling 'fear' between May 20 and July 19 but quickly improved after the $1,750 support held.
Despite this, the current 25% delta skew at negative 4 isn't enough to configure a 'greed' indicator. Options markets pricing is currently well balanced between call (buy) and put (sell) options.
Both derivatives metrics suggest that professional traders gradually exited the 'fear mode' on July 20, but they are nowhere near bullish.
Currently, there is little confidence in the recent rally from these metrics' perspective, which is understandable considering the risks presented by the upcoming hard fork and the uncertainty caused by unsatisfied miners.
The views and opinions expressed here 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.
