The price of Ether (ETH) is down 37.5% in the last seven days and recent news reports that developers have decided to postpone the migration of the network to proof-of-stake (PoS) consensus. This update is expected to end the reliance on proof-of-work (PoW) mining and the Merge scalability solution that has been pursued for the past six years.
Competing smart contracts such as BNB, Cardano (ADA), and Solana (SOL) have outperformed Ether by 13%-17% since June 8, despite a market-wide correction on the cryptocurrency industry. This suggests that the problems of the Ethereum network also weighed on the price of ETH.
The “difficulty bomb” feature was added to the code in 2016, when plans for the new consensus mechanism (Eth2) were being drawn up. At the height of the so-called “DeFi summer”, Ethereum’s average transaction costs exceeded $65, frustrating even the most hardcore users. Precisely for this reason, the Merge plays such an important role in the eyes of investors and, consequently, in the price of Ether.
Options traders remain highly risk averse
Traders should look at data from the Ether derivatives markets to understand how professionals and market makers position themselves. The 25% delta slope is a telltale sign whenever professional traders overcharge for upside or downside protection.
If traders were expecting an Ether price drop, the bias indicator would move above +10%. On the other hand, the widespread hype would make the indicator move to -10%. This is precisely why the metric is known as the fear and greed metric of professional traders.
The slope indicator improved on June 16, at least for a brief moment, as it touched 19%. However, as soon as it became clear that breaking back above the $1,200 resistance would take longer than anticipated, the slope indicator jumped back up to +24%. The higher the index, the less willing traders are to take downside risks.
The ratio of longs to shorts shows the disinterest in short positions
The net ratio of long to short positions held by professional traders excludes externalities that might have affected only the options markets. By analyzing these positions on cash, perpetual, and quarterly futures contracts, you can better understand whether professional traders are bullish or bearish.
From time to time there are methodological discrepancies between the various exchanges, so viewers should keep an eye on changes rather than absolute numbers.
Despite the fact that ETH has failed to hold the $1,200 support, professional traders did not change their positions between June 14 and 16, according to the positions indicator.
Binance showed a modest increase in its ratio of long to short positions, as the indicator went from 1.11 to 1.22 in two days. Therefore, those traders slightly increased their bullish bets.
Huobi’s data shows a stable pattern, as the indicator stayed close to 1.00 all the time. Lastly, on OKX, the metric swung sharply within the period but ended almost unchanged at 1.04.
We must hope for the best, but we must be ready for the worst
Overall, there has been no significant change in the futures positions of traders, whales, and market makers, despite Ether’s drop to $1,012 on June 15. However, option traders fear that a crash below $1,000 is still possible, but the negative news flow weighs heavily on the price.
If those whales and market makers had any indication that a deeper price correction might be in the offing, this would have been reflected in the ratio of exchanges long to short.
As the saying goes, “follow their actions, not their words”, which means that traders should be prepared for an Ether price below $1,000, but not as a base case.
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