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Ethereum price data points to impending rally above $3.4K

July 10, 2024 Coin Telegraph

Ethereum price data points to impending rally above .4K

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Three key Ethereum price metrics suggest ETH is primed for a rally above $3,400.

Ether (ETH) price experienced an 18% drop to $2,826 between July 1 and July 8 but has since partially recovered. Investors are understandably disappointed, particularly since $313 million in leveraged long positions were liquidated during this period. Although the current price of $3,100 is still below the previous $3,400 support level, Ether traders are gradually regaining their confidence, as indicated by onchain and derivatives metrics.

Even if the launch of the spot Ethereum exchange-traded fund (ETF) in the United States takes longer than expected, strong fundamentals suggest a likely price rebound soon. Gary Gensler, Chair of the US Securities and Exchange Commission, recently stated that approvals for S-1 filings are expected "sometime in the summer," which means before the end of September. However, the exact timeline remains uncertain, leaving traders with reasons to maintain a level of skepticism.

The excitement for the eventual launch grows as similar spot Bitcoin (BTC) ETFs have seen $654 million in inflows over the past three days. Matt Hougan, Bitwise's Chief Investment Officer, suggested that spot Ethereum ETFs could attract up to $15 billion in inflows in the first 18 months of trading. Even if this estimate is off by 50%, analysts believe that the Ether price will benefit from the portion of the supply that is locked in staking and decentralized applications (DApps).

Ethereum futures markets suggest rally to $3.7K is highly unlikely

June 25, 2024 Coin Telegraph

Ethereum futures markets suggest rally to .7K is highly unlikely

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Analysts warn that a spot ETH ETH approval might not produce the bullish price outcome that many traders expect. Do futures markets agree?

Ether (ETH) price might be on the brink of its most significant event in terms of a spot ETH ETF integrating the altcoin with traditional financial markets, yet its price is not responding as expected. In fact, on June 24, Ether reached its lowest level in over a month, falling to the $3,250 level. Although ETH eventually reclaimed the $3,400 support on June 25, both onchain and derivatives metrics suggest limited upside potential.

Some analysts believe that the timing of the Ethereum spot exchange-traded fund (ETF) launch is unlikely to result in substantial net inflows under the current market conditions. Even though the regulator dropped its investigations into Consensys, a prominent Ethereum ecosystem company, and shelved the potential classification of Ethereum staking as a security, the broader economic environment remains challenging.

Bloomberg ETF analysts Eric Balchunas and James Seyffart project that Ethereum ETFs could attract between $1 billion and $2 billion in the initial weeks. Likewise, Stephen Richardson, managing director of financial markets at Fireblocks, told Cointelegraph that he expects significantly lower inflows at the Ethereum ETF launch.

Ethereum (ETH) price fails to rally in the face of good news — Here is why

June 20, 2024 Coin Telegraph

Hacker Commandeers Official SEC X Account, Falsely Claims Regulator Has Approved Spot Bitcoin ETF

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Ethereum futures premium hits 1-year high — Will ETH price follow?

November 1, 2023 Coin Telegraph

Aptos

ETH rallied alongside Bitcoin as new spot ETF news emerged, and the altcoin could benefit from the failure of its layer-1 competitors.

Ether (ETH) price has declined by 14.7% since its peak at $2,120 on April 16, 2023. However, two derivatives metrics indicate that investors have not felt this bullish in over a year. This discrepancy warrants an investigation into whether the recent optimism is a broader response to Bitcoin (BTC) breaking above $34,000 on Oct. 24.

One possible reason for the surge in enthusiasm among investors using ETH derivatives is the overall market's excitement regarding the potential approval of a spot Bitcoin exchange-traded fund (ETF) in the United States. According to analysts from Bloomberg, the ongoing amendments to the spot Bitcoin ETF proposals can be seen as a “good sign” of progress and impending approvals. This development is expected to drive the entire cryptocurrency market to higher price levels.

Interestingly, comments issued by the U.S. SEC Chair Gery Gensler's in 2019 reveal his perspective. During the 2019 MIT Bitcoin Expo, Gensler termed the SEC's position at the time as "inconsistent" because they had denied multiple spot Bitcoin ETF applications, while futures-based ETF products that do not involve physical Bitcoin had been in existence since December 2017.

Another potential factor in the optimism of Ethereum investors using derivatives may be the pricing of the Dencun upgrade scheduled for the first half of 2024. This upgrade is set to enhance data availability for layer-2 rollups, ultimately leading to reduced transaction costs. Moreover, the upgrade will prepare the network for the future implementation of sharding (parallel processing) as part of the blockchain's "Surge" roadmap.

Ethereum co-founder Vitalik Buterin highlighted in his Oct. 31 statement that independent layer-1 projects are gradually migrating and potentially integrating as Ethereum ecosystem layer-2 solutions. Buterin also noted that the current costs associated with rollup fees are not acceptable for most users, particularly for non-financial applications.

Challenges for Ethereum competitors

Ethereum competitors are facing challenges as software developers realize the associated costs of maintaining a complete record of a network's transactions. For instance, SnowTrace, a popular blockchain explorer tool for Avalanche (AVAX), announced its shutdown supposedly due to the high costs.

Phillip Liu Jr., head of strategy and operations at Ava Labs, pointed out the difficulties users face in self-validating and storing data on single-layer chains. Consequently, the substantial processing capacity required often leads to unexpected issues.

For example, on October 18, the Theta Network team encountered a "edge case bug" after a node upgrade, causing blocks on the main chain to halt production for several hours. Similarly, layer-1 blockchain Aptos Network (APT) experienced a five-hour outage on October 19, resulting in a halt in exchanges' deposits and withdrawals.

In essence, the Ethereum network may not currently offer a solution to its high fees and processing capacity bottlenecks. Still, it does have an eight-year track record of continuous upgrades and improvements toward that goal with few major disruptions.

Assessing bullish sentiment in ETH derivatives markets

After evaluating the fundamental factors surrounding the Ethereum network, it's essential to investigate the bullish sentiment among ETH traders in the derivatives markets, despite the negative performance of ETH, which has dropped 14.7% since its $2,120 peak in April.

The Ether futures premium, which measures the difference between two-month contracts and the spot price, has reached its highest level in over a year. In a healthy market, the annualized premium, or basis rate, should typically fall within the range of 5% to 10%.

*Ether 1-month futures basis rate. Source: Laevitas.ch*

Such data is indicative of the growing demand for leveraged ETH long positions, as the futures contract premium surged from 1% on Oct. 23 to 7.4% on Oct. 30, surpassing the neutral-to-bullish threshold of 5%. This surge in the metric follows a 15.7% rally in ETH's price over two weeks.

Analyzing the options markets provides further insight. The 25% delta skew in Ether options is a useful indicator of when arbitrage desks and market makers overcharge for upside or downside protection. When traders anticipate a drop in Ether's price, the skew metric rises above 7%. Conversely, phases of excitement tend to exhibit a negative 7% skew.

*Ether 30-day options 25% delta skew. Source: Laevitas.ch*

Notice how the Ether options 25% delta skew reached a negative 16% level on Oct. 27, the lowest in over 12 months. During this period, protective put (sell) options were trading at a discount, a characteristic of excessive optimism. Moreover, the current 8% discount for put options is a complete turnaround from the 7% or higher positive skew that persisted until Oct. 18.

In summary, the drivers behind the bullish sentiment among Ether investors in derivatives markets remain somewhat elusive. Traders may be expecting approval for Ether spot ETF instruments following Bitcoin's potential approval, or they may be banking on planned upgrades that aim to reduce transaction costs and eliminate the competitive advantage of other blockchain networks like Solana (SOL) and Tron (TRX).

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.

Bitcoin price holds $26K as derivatives data hints at end of volatility spike

August 21, 2023 Coin Telegraph

Bitcoin price holds K as derivatives data hints at end of volatility spike

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BTC futures and options data show pro traders’ sentiment was not impacted despite last week’s 11.4% correction.

In the past few months, Bitcoin traders had grown used to less volatility, but historically, it’s not uncommon for the cryptocurrency to see price swings of 10% in just two or three days. The recent 11.4% correction from $29,340 to $25,980 between Aug. 15 and Aug. 18 took many by surprise and led to the largest liquidation since the FTX collapse in November 2022. But the question remains: Was this correction significant in terms of the market structure?

Certain experts point to reduced liquidity as the reason for the recent spikes in volatility, but is this truly the case?

BTC surged 70%+ in 2023, yet the "Alameda gap" - liquidity dip post FTX and Alameda Research collapse - remains, supported by low volatility.

Read full analysis here: https://t.co/kVslgLQtpL pic.twitter.com/g8Ac7udBl7
— Kaiko (@KaikoData) August 17, 2023

As indicated by the Kaiko Data chart, the decline of 2% in the Bitcoin (BTC) order book depth has mirrored the decrease in volatility. It’s possible that market makers adjusted their algorithms to align with the prevailing market conditions.

Hence, delving into the derivatives market to assess the impact of the drop to $26,000 seems reasonable. This examination aims to determine whether whales and market makers have become bearish or if they’re demanding higher premiums for protective hedge positions.

To begin, traders should identify similar instances in the recent past, and two events stand out:

*Bitcoin/USD price index, 2023. Source: TradingView*

The first decline took place from March 8 to March 10, causing Bitcoin to plummet by 11.4% to $19,600, marking its lowest point in over seven weeks at that time. This correction followed the liquidation of Silvergate Bank, a crucial operational partner for multiple cryptocurrency firms.

The subsequent significant move occurred between April 19 and April 21, resulting in a 10.4% drop in Bitcoin’s price. It revisited the $27,250 level for the first time in more than three weeks after Gary Gensler, the chair of the United States Securities and Exchange Commission, addressed the House Financial Services Committee. Gensler’s statements provided little reassurance that the agency’s enforcement-driven regulatory efforts would cease.

Not every 10% Bitcoin price crash is the same

Bitcoin quarterly futures generally tend to trade with a slight premium when compared to spot markets. This reflects sellers’ inclination to receive additional compensation in return for delaying the settlement. Healthy markets usually see BTC futures contracts being traded with an annualized premium ranging from 5 to 10%. This situation, termed “contango," is not unique to the cryptocurrency domain.

*Bitcoin 3-month futures premium, March/April 2023. Source: Laevitas*

Leading up to the crash on March 8, Bitcoin’s futures premium was at 3.5%, indicating a moderate level of comfort. However, when Bitcoin’s price dipped below $20,000, there was an intensified sense of pessimism, causing the indicator to shift to a discount of 3.5%. This phenomenon, referred to as "backwardation," is typical of bearish market conditions.

Conversely, the correction on April 19 had minimal impact on Bitcoin's futures main metric, with the premium remaining around 3.5% as the BTC price revisited $27,250. This could imply that professional traders were either highly confident in the soundness of the market structure or were well-prepared for the 10.4% correction.

The 11.4% BTC crash between Aug. 15 and Aug. 18, reveals distinct dissimilarities from previous instances. The starting point for Bitcoin’s futures premium was higher, surpassing the 5% neutral threshold.

*Bitcoin 3-month futures premium, August 2023. Source: Laevitas*

Notice how rapidly the derivatives market absorbed the shock on Aug. 18. The BTC futures premium swiftly returned to a 6% neutral-to-bullish position. This suggests that the decline to $26,000 did not significantly dampen the optimism of whales and market makers regarding the cryptocurrency.

Options markets confirm lack of bearish momentum

Traders should also analyze options markets to understand whether the recent correction has caused pro traders to become more risk-averse. In short, if traders anticipate a Bitcoin price drop, the delta skew metric will rise above 7%, and phases of excitement tend to have a -7% skew.

*Bitcoin 30-day options 25% delta skew. Source: Laevitas*

Data indicate excessive demand for call (buy) BTC options ahead of the Aug. 15 crash, with the indicator at -11%. This trend changed over the subsequent five days, though the metric remained within the neutral range and was unable to breach the 7% threshold.

Ultimately, both Bitcoin options and futures metrics reveal no signs of professional traders adopting a bearish stance. While this doesn’t necessarily guarantee a swift return of BTC to the $29,000 support level, it does reduce the likelihood of an extended price correction.

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.

Why Bitcoin’s resistance to retesting the $25K support could be futile

June 13, 2023 Coin Telegraph

Why Bitcoin’s resistance to retesting the K support could be futile

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Bitcoin price continues to explore the lower regions of its trading range, but a drop to $25,000 seems nearly inevitable according to derivatives data.

Bitcoin (BTC) has been trading in a narrow 3.4% range for the past three days after successfully defending the $25,500 support on June 10. In this time, investors’ attention has shifted to the macroeconomic area as the U.S. Federal Reserve will announce its interest rate decision on June 14.

Cryptocurrencies might work independently from the traditional finance markets, but the cost of capital impacts almost every investor. Back in May, the Fed raised its benchmark interest rate to 5%–5.25%, the highest since 2007.

All eyes will be on Fed’s Chair Jerome Powell media speech 30 minutes after the rate announcement as markets are pricing in 94% odds of a pause at the June meeting, based on the CME FedWatch tool.

Crypto fears more than just a FOMC meeting

The upcoming FOMC meeting isn’t the only concern for the economy, as the U.S. Treasury is set to issue more than $850 billion in new bills between now and September.

Additional government debt issuance tends to cause higher yields and, thus, higher borrowing costs for companies and families. Considering the already restrained credit market due to the recent banking crisis, odds are that gross domestic product growth will be severely compromised in the coming months.

According to on-chain analytics firm Glassnode, miners have been selling Bitcoin since the start of June, potentially adding further pressure to the price. Among the potential triggers are reduced earnings from a cooldown in Ordinals activity and the mining hash rate reaching an all-time high.

Investors now question whether Bitcoin will test the $25,000 resistance, a level unseen since mid-March and for this reason,they are closely monitoring Bitcoin futures contract premiums and the costs of hedging using BTC options.

Bitcoin derivatives show modest improvement

Bitcoin quarterly futures are popular among whales and arbitrage desks. However, these fixed-month contracts typically trade at a slight premium to spot markets, indicating that sellers are asking for more money to delay settlement.

As a result, BTC futures contracts in healthy markets should trade at a 5% to 10% annualized premium — a situation known as contango, which is not unique to crypto markets.

*Bitcoin 2-month futures annualized premium. Source: Laevitas*

The demand for leveraged BTC longs has slightly increased as the futures contract premium increased to 3% from 1.7% on June 10, although it is still far from the neutral 5% threshold.

Traders should also analyze options markets to understand whether the recent correction has caused investors to become more optimistic. The 25% delta skew is a telling sign of when arbitrage desks and market makers overcharge for upside or downside protection.

In short, if traders anticipate a Bitcoin price drop, the skew metric will rise above 7%, and phases of excitement tend to have a negative 7% skew.

The 25% delta skew metric entered "fear" mode on June 10 as Bitcoin’s price faced a 4.5% correction. Currently at 4%, the indicator displays a balanced pricing between protective puts and the neutral-to-bullish call options.

The crypto bear trend looks set to continue

Normally, a 3% futures basis and a 6% delta skew would be considered bearish indicators, but that is not the case given the extreme amount of uncertainty regarding the economic conditions and the recent charges against Binance and Coinbase. The SEC alleges those exchanges held unregistered offerings and sales of tokens and failed to register as brokers.

U.S. lawmakers have criticized the SEC for its heavy-handed approach to crypto enforcement. On June 12, Representative Warren Davidson proposed a bill aimed at restructuring the SEC by firing chair Gary Gensler and redistributing power between the commissioners.

The uncertain crypto regulatory environment remains a hurdle to attracting institutional investors. Furthermore, the recession risk for the U.S. economy limits the demand for risk-on assets such as Bitcoin, increasing the odds of the $25,000 support being tested.

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.

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