According to Derivatives Markets, Ether (ETH) traders are confident that there is a chance of further gains, even though a 23% correction on September 7 affected prices.
Traffic on the Ethereum network also peaked on September 7, when the average transaction fee reached $60, and has remained above $17 since then. As a result of the network’s ongoing challenges, investors have turned to Ethereum’s competitors with Bridge and other levels. For example, DOT Polkadot is up 29% in the past week, while Algorand’s ALGO is up 67%.
There is undoubtedly pressure for interoperability and other levels of scaling solutions aimed at meeting the rapidly growing demand for non-financial (NFT) tokens and decentralized finance (DeFi) applications.
It now appears whether the Ethereum network will retain its absolute leadership is not important, as the net worth of the industry as fixed (adjusted total value locked) in smart contracts has grown from $13.6 billion in December 2020 to $82 billion today.
Legislative concerns from the US are likely to stifle investor optimism about cryptocurrencies. According to a document released by the House committee on September 13, lawmakers are seeking to plug a loophole that previously allowed investors to claim rebates in exchange for winnings. The IRS currently treats cryptocurrencies as a net selling property and, as a result, is exempt from 30-day buyback policies.
Price of ether bestamp in dollars. Source: TradingView
A short-term test of $4,000 on September 3 has for a moment pushed the derivatives markets to overburden. The 45-day rally saw Ether price rise from $1,735 on July 20, a 130% increase. Meanwhile, support remained at $3,200 and boosted the bulls’ confidence, despite the fact that altcoins were down 16% in eight days.
ETH futures data shows bulls remain bullish
Quarterly ether futures are the preferred instruments for whale charts and arbitrage. Due to the settlement history and the spread in the spot markets, this can be difficult for retail traders. However, the most notable feature is the absence of fluctuations in the funding rate.
These fixed-term contracts usually trade at a small premium on the spot markets, which indicates that sellers are asking for more money to delay settlement for a longer period. Therefore, futures contracts should trade at a premium of 5% to 15% annually in healthy markets. This mode is known as “contango” and is not limited to the cryptocurrency markets.
3-month annual premium on Ethereum futures. Source: Laevitas
As shown above, ether futures have enjoyed a decent premium of 8% since August 9. Aside from short-term gains above 15% on September 7th, derivatives traders are cautiously bullish.
To understand whether this movement applies exclusively to these instruments, you should also analyze futures data. Although buying (buyers) and short selling (sellers) are always the same in any futures contract, their effect is different.
Thus, the exchanges will charge the financing interest from the side that uses the higher leverage to balance the risks, and this commission is paid to the other side.
ETH perpetual futures contract, 8 hour funding rate. Source: Bybt
Data show that on September 2, moderate noise began to appear, lasting less than five days. The positive financing interest rate indicates that the buyers (buyers) paid the commission, but the move appears to have been a reaction to the price increase, and it disappeared when Ether crashed on September 7.
At the moment, there are no signs of weakness in the Ether derivatives markets, and this can be interpreted as a bullish sign. Investors are still focused on regulatory changes and Ethereum 2.0, which everyone believes should solve the scalability problem for good.