Pro Traders Doubt Ether’s Future Gains Despite Holding at $1,820

In the Brief:

  • Ether price remains steady at $1,820
  • Traders cautious about further gains
  • No surge in demand for leveraged longs
  • Ether futures premium worsens
  • Macro-economic conditions drive positive momentum

3 - 6 minute read

The Ether (ETH) price has remained steady above $1,820 for the past three weeks, despite a recent 13.7% correction between April 18-21. However, professional investors remain bearish, as evidenced by ETH options and futures metrics. In this Forbes-style article, we will analyze the current state of the cryptocurrency market and discuss what it means for traders.

The ongoing banking crisis, coupled with worsening macroeconomic conditions, have been driving positive momentum for cryptocurrencies in 2023. According to Arthur Hayes, former CEO of BitMEX, the government’s refusal to bail out First Republic Bank could set off a dangerous chain reaction of insolvencies. Additionally, recession risks have increased, with the U.S. economy growing at a modest 1.1% annualized pace in the first quarter, well below the expected 2%. Inflation also continues to hurt the economy, with the personal consumption expenditures price index rising 4.2% in the first quarter.

Despite the bearishness of whales and market makers, the Ethereum network has seen an increase in total value locked (TVL), with Ethereum DApps reaching 15.3 million ETH in TVL on April 24, compared to 22.0 million ETH six months prior. However, Ether’s inability to break above $2,000 could reflect traders anticipating the Federal Reserve to raise interest rates again on May 3. Higher interest rates make fixed-income investments more attractive, creating a bearish environment for risk assets, including ETH.

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

Ether 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. 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. Ether traders have been cautious in the past few weeks, and even with the recent breakout above $2,100 on April 14, there has been no surge in demand for leveraged longs. Furthermore, the Ether futures premium has worsened from its recent peak of 4.7% on April 1 to its current 1.8% level, suggesting that buyers are avoiding leveraged longs.

Ether 3-month futures annualized premium. Source: Laevitas

In essence, Ether options and futures markets suggest that pro traders are less confident compared to a week prior, but not excessively pessimistic. Consequently, if the ETH price breaks above $2,000, it would be a surprise for most, but at the same time, the indicators show no signs of stress.

The Bottom Line

In light of the current market conditions, traders should remain cautious with their investments. While the Ether price has held above $1,820 for the past three weeks, professional investors remain bearish. It’s important to conduct thorough research and analysis before making any investment or trading decisions. The ongoing banking crisis and worsening macroeconomic conditions could continue to drive positive momentum for cryptocurrencies, but the potential risks cannot be ignored. Moreover, traders should keep a close eye on the Federal Reserve’s interest rate decisions and monitor the options and futures markets for any signs of stress.

Disclaimer: The content in this article is provided for informational purposes only and should not be considered as financial or trading advice. We are not financial advisors, and trading carries high risk. Always consult a professional financial advisor before making any investment decisions.

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