Ether (ETH) turned down the $2,000 resistance on Aug 14, but the solid 82.8% gain from the rising wedge formation started on Jul 13 certainly looks like a win for the bulls. The dream of “ultrasonic money” is certainly closer, as the network expects the Merge transaction to a proof-of-stake (PoS) consensus network on September 16.
Some critics point out that the transition away from proof-of-work (PoW) mining has been delayed for years and that Merge itself does not address the scalability issue. The migration of the network to parallel processing (sharding) is expected to occur in late 2023 or early 2024.
As for Ether bulls, the EIP-1559 burn mechanism introduced in August 2021 was essential in driving ETH into scarcity, as cryptanalyst and influencer Kris Kay illustrates:
~ 11% of all $ETH supply now staked.
~ 2% of all $ETH supply now burned
~ 100% of $ETH is ultra-sound money
+=
few
—Kris Kay | DeFi Donut (@thekriskay) August 15, 2022
The long-awaited switch to the Ethereum Beacon Chain enjoyed much criticism, despite removing the need to support expensive, energy-intensive mining activities. Next, “DrBitcoinMD” highlights the inability for ETH stakers to withdraw their coins, creating an unsustainable temporary supply squeeze.
Anyone still putting their faith behind the gangly Russian pseudointellectual and the Ethereum ponzi deserves what’s coming to them. pic.twitter.com/gjxHXdzuSK
— Doc (@DrBitcoinMD) August 11, 2022
Without a doubt, the decrease in the number of coins available for sale caused a supply shock, especially after the 82.8% rally that Ether has recently suffered. Still, these investors were aware of the risks of ETH 2.0 staking and no promises of instant transfers were made after the merger.
Options Markets Reflect Doubtful Sentiment
Investors should look at data from the Ether derivatives markets to understand how the whales and arbitrage desks are positioned. The 25% delta slope is a telltale sign when traders are overcharging for upside or downside protection.
If those market participants feared an Ether price drop, the bias indicator would move above 12%. On the other hand, the generalized hype reflects a negative inclination of 12%.
The tilt indicator has remained neutral since Ether started the rally, even as it tested the $2,000 resistance on Aug. 14. The lack of improvement in market sentiment is slightly concerning as ETH options traders are currently assessing similar risks of price moves higher and lower.
Meanwhile, the long to short data shows low confidence at the $2,000 level. This metric excludes externalities that might have affected only the options markets. In addition, it collects data on the positions of exchange clients in cash, perpetual and quarterly futures contracts, which allows a better understanding of the position of professional traders.
From time to time there are methodological discrepancies between the various exchanges, so readers should look at the changes rather than the absolute numbers.
Although Ether is up 18% from August 4 to 15, professional traders slightly reduced their leveraged long positions, according to the ratio indicator. For example, Binance’s trader ratio improved a bit from the start of 1.16, but ended the period below its initial level near 1.12.
Meanwhile, Huobi showed a modest decline in its long-short ratio, as the indicator went from 0.98 to the current 0.96 in eleven days. Lastly, the metric peaked at 1.70 on the OKX exchange, but only slightly increased from 1.46 on August 4 to 1.52 on August 15. Thus, on average, traders were not confident enough to maintain their leveraged bullish positions.
There has been no significant change in the leveraged positions of traders and market makers despite Ether’s 18% gains since Aug 4. If options traders are pricing in similar risks to Ether price moves up and down, there is likely a reason for it. For example, a strong endorsement of the proof-of-work fork would pressure ETH.
One thing is for sure, at the moment professional traders are not confident that the $2,000 resistance will be broken easily.
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