The price of Ether (ETH) is up 16% since July 1 and has outperformed Bitcoin (BTC) in the last 7 days. This move could be due in part to investors holding on to their hopes that the Ethereum network’s transition to proof-of-stake (PoS) consensus will be a bullish catalyst.
The next steps of this smart contract involve “the Fusion”, which was previously known as Eth 2.0. The final test on the Goerli testnet is expected in July, before the Ethereum mainnet is given the green light for its upgrade.
Since the collapse of the Terra ecosystem in mid-May, Ethereum’s Total Value Locked (TVL) has increased and the flight to quality in the decentralized finance (DeFi) industry greatly benefited Ethereum thanks to its strong security. and to its battle-tested apps, including MakerDAO.
Ethereum currently has a 57% TVL market share, up from 51% on April 8, according to data from Defi Llama. Despite this gain, the current $35 billion in deposits in the networks’ smart contracts looks small compared to the $100 billion seen in December 2021.
Further supporting the decline in the use of decentralized applications on Ethereum is the drop in median transfer fees, or gas costs, which currently stand at $1.32. This figure is the lowest since mid-December 2020, when the network’s TVL stood at $13 billion. However, some of the movement could be attributed to increased use of Layer 2 solutions like Polygon and Arbitrum.
Options traders flirt with the neutral range
Traders should look at data from the Ether derivatives markets to understand how tellers and market makers are positioning themselves. In that sense, the 25% delta slope is a telltale sign when professional traders are overcharging for bullish or bearish protection.
If investors expect the price of Ether to rise, the bias indicator moves to -12% or lower, reflecting widespread enthusiasm. On the other hand, a skew above 12% shows reluctance to adopt bearish strategies, typical of bear markets.
The bias indicator briefly touched the neutral-to-bearish range on July 7 as Ether completed a 19% rally in four days. But those option traders soon switched to a more conservative approach, giving higher odds of a market drop when the skew moved to the current 13% level. In short, the higher the index, the less inclined traders are to price downside risk.
Margin traders have become extremely bullish
To confirm whether these movements are limited to the specific instrument of the options, one must analyze the margin markets. Loans allow investors to leverage their positions to buy more cryptocurrencies. When those expert traders go long on margin, their profits (and possible losses) depend on the rise in the price of Ether.
Bitfinex margin traders are known to create position contracts of 100,000 ETH or more in a very short time, indicating the involvement of whales and large arbitrage tables.
Interestingly, these margin traders have greatly increased their longs since June 13 and the current 491,000 contracts is near its highest level in 8 months. This data shows that these traders are not expecting a disastrous price move below $900.
Although there has been no significant change in professional option traders’ risk metrics, margin traders remain bullish and unwilling to cut their longs despite the “crypto winter”.
If these whales and market makers are convinced that $880 on June 18 was the absolute bottom, traders may start to believe that the worst leg of the bear market is behind us.
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