The two main Ethereum price indicators are not yet bearish, but it won’t be long before ETH dips below $1,000.
Ether (ETH) price has fallen by 37.5% in the last seven days and recent news has reported that developers have decided to postpone the network’s transition to Proof-of-Stake (PoS) consensus. This update aims to end the dependency on Proof-of-Work (PoW) mining and the scalability solution Merge, which has been used for the past six years.
Competing smart contracts like BNB, Cardano (ADA) and Solana (SOL) have outperformed Ethereum by 13-17% since June 8, despite a general market correction in the cryptocurrency sector. This suggests that the problems of the Ethereum network have also affected the price of ETH.
The Complexity Bomb feature was added to the code in 2016 when plans were formulated for a new consensus mechanism (formerly Eth2). In the middle of the so-called “DeFi summer,” the average value of Ethereum transactions surpassed $65, disappointing even the most active users. This is why the merger plays such an important role in the eyes of investors and therefore in the price of Ether.
Options traders are still extremely risk averse
Traders should look at data from the Ethereum derivatives markets to understand how whales and market makers are positioning. A skewed delta of 25% is a strong indication when professional traders are overpriced for upside or downside protection.
If traders were expecting Ethereum to crash, the skew indicator would rise above 10%. On the other hand, generalized arousal reflects a negative 10 percent asymmetry. For this reason, this metric is known as the fear and greed metric of professional traders.
30-day ether options with a 25% delta skew: Source: Laevitas.ch
The skew indicator improved, at least temporarily, to 19% on June 16th. However, when it became apparent that it would take longer than expected to break the $1,200 resistance, the skew rate returned to 24%. The higher the index, the less likely traders are to assess downside risk.
Data on the movement of long and short positions shows that traders are not interested in going short
The net long-to-short ratio of leading traders excludes external factors that may have solely impacted the options markets. By analyzing these positions on the spot, perpetual and quarterly futures contracts, one can better understand whether professional traders tend to be bullish or bearish.
Sometimes methodological discrepancies arise between different exchanges, so viewers should follow the changes, not the absolute numbers.
The ratio of long and short positions of the ether of the leading traders of the exchanges. Source: coin jar
Although Ethereum failed to hold the $1,200 support, professional traders did not change their positions between June 14th and 16th, according to the long/short indicator.
Binance saw a slight increase in the long/short ratio as the indicator moved from 1.11 to 1.22 in two days. So these traders increased their bullish bets a bit.
The Huobi data shows a stable picture as the long-short indicator stayed around 1.00 throughout. Finally, on the OKX exchange, the indicator fluctuated wildly during the period but remained almost unchanged at 1.04.
Hope for the best but prepare for the worst
Overall, despite Ether’s decline to $1,012 on June 15th, Whale and Market Maker futures positions did not move significantly. However, options traders fear a drop below $1,000 remains a possibility but the negative news flow is weighing heavily on the price.
If these whales and market makers had evidence that a deeper price correction was possible, it would be reflected in the ratio of long and short positions held by the exchange’s top traders.
As the saying goes, “Follow your actions, not your words,” meaning traders should be prepared for Ether below $1,000, but not as a base case.
The views and opinions expressed herein are solely those of the author and do not necessarily reflect the views of Cointelegraph. Every investment and trading movement involves risk. You should do your own research when making a decision.