The price of Ether (ETH) rose 11% between March 26 and 29 to reach $3,480, which is the highest level in 82 days. The price is currently down 9% year-to-date, but does the data support the belief that the altcoin has resumed its uptrend towards a new all-time high?
Institutional investors seem excited by CoinShares’ weekly digital asset cash flow report which revealed on Tuesday that inflows of publicly traded crypto products reached the highest level in three months. The data showed that investment products for digital assets saw net deposits of $193 million last week.
At the same time, the Office of Science and Technology Policy, an executive office of the US president, launched a study to offset energy use related to digital assets. Additionally, on March 9, US President Joe Biden signed an executive order directing various federal agencies to examine the implications of digital assets.
The planned move of the Ethereum network towards proof-of-stake consensus may also explain some of its outperformance against Bitcoin. The transition was postponed several times, although the first quarter of 2022 was mentioned in the official roadmap. By removing the burden of digital mining, Ethereum plans to become more efficient and enable cheaper and faster transactions.
Even with the anticipation of the PoS update, the rally of the last 3 days is not enough to make professional Ether traders bullish according to derivatives metrics.
To understand how larger traders position themselves, look at Ether futures and options market data. For example, the basis indicator measures the difference between longer term futures contracts and current cash market levels.
The annualized premium for Ether futures should range from 5% to 10% to compensate traders for “locking up” money for two to three months until the contract expires. Levels below 5% are bearish, while numbers above 10% indicate excessive demand from buyers.
The chart above shows that the Ether base gauge has recovered from 2% on March 13 to 6% today. This level is above the 5% bearish sentiment threshold, but at the same time indicates weak demand to go long on ETH futures.
Although the metric points to a neutral to bearish sentiment, it should be remembered that Ether remains 9% down year-to-date and 28% below its all-time high of $4,800.
Options Traders Fear ETH Could Drop Lower
The 25% slope of the options delta is extremely useful as it shows whether arbitrage desks and market makers are overcharging for upside or downside protection.
If options investors fear an Ether price drop, the bias indicator will move above +10%. On the other hand, widespread enthusiasm reflects a -10% bias.
The bias indicator fell below 10% on March 18, breaking out of the “fear” level as these option traders are no longer overcharging for downside protection. The current level of 7% remains close to a bearish threshold.
Although there was a modest improvement in the Ether futures premium, the indicator remains neutral. Basically, the ETH options markets are at a slightly higher downside risk, so professional traders are not confident that the current support at $3,400 will hold.
The views and opinions expressed herein are solely those of the Author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should do your own research when making a decision.
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