Traders continue to say that the ETH price will soon fall below $1,600, but a key trading indicator shows that most of them are reluctant to bearish bets below $1,900.
Ether (ETH) has fallen by 25% in just a month, and even the recent upgrade to Proof-of-Stake (PoS) consensus on the Ropsten testnet could not change the price of the altcoin.
The merger is expected to resolve power issues and pave the way for higher transaction throughput, but the actual full transition for the Ethereum network is not expected before the end of the year. Ethereum developer Paritosh Jayanti also noted that some bugs were discovered in the PoS implementation, but they should be fixed in the coming weeks.
Luckily for Ethereum, its two main competitors have recently run into problems of their own. The Solana Network (SOL) experienced its fifth outage in 2022 after four hours of no new blocks on June 1st. Each dapp has been put on hold until the validators can fix the issue and re-sync the network.
Most recently, on June 7, Binance’s native BNB token plunged 7% after it was revealed that the US Securities and Exchange Commission announced it was investigating the 2017 Initial Coin Offering (ICO). According to Bloomberg, at least one U.S. citizen has claimed to have participated in an ICO, which could be pivotal in the SEC case.
Regulatory uncertainty may be part of the reason for the sharp Ether correction. On June 6, the Hong Kong Securities and Futures Commission (SFC) issued a warning about the investment risks of volatile tokens. The regulator highlighted non-transparent pricing, illiquid markets and fraud in the sector.
Option traders are still extremely risk averse
Traders should look at data from the Ethereum derivatives markets to understand how larger traders are positioning. A skewed delta of 25% is a telltale sign that whales and arbitrageurs are overpaying for upside or downside protection.
When these traders fear a collapse in Ethereum prices, the skew indicator will rise above 10%. On the other hand, general arousal reflects a negative 10 percent asymmetry. That is why this metric is known as the professional trader’s fear and greed metric.
30-day Ether options with a delta skew of 25%: Source: Laevitas.ch
The skew indicator has been above 10% since May 22 and recently peaked at 20% on June 3. These readings signal extreme anxiety for options traders, and despite a modest improvement, the current 17% delta skew shows whales and arbitrageurs are unwilling to take downside risk.
Data from long to short show some positives
The net long-to-short ratio of leading traders excludes external factors that could only affect options markets. By analyzing the positions of these top clients in the field, perpetual and quarterly futures contracts, one can better understand whether professional traders are 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 Ethereum positions on the exchanges of leading traders. Source: piggy bank
Although Ethereum struggled to hold on to $1,800 as support, professional traders did not move positions between June 5 and 9, according to the Long/Short indicator.
Binance saw a slight decline in the long-to-short ratio as the indicator rose from 0.99 to 0.96 now in four days. Consequently, these traders slightly increased their bearish bets.
Huobi data shows a similar picture: on June 9, the indicator moved from 1.02 to 0.98, which is a small shift in favor of short positions. On the OKX exchange, the indicator fluctuated sharply during the period, but closed almost unchanged at 1.35.
Related: DeFi contagion? Analysts warn of separating 50% of Ethereum from Ethereum
Mixed derivatives data gives bulls hope
Overall, there have been no significant changes in the leverage of whales and market makers, although Ethereum failed to overcome the $1,900 resistance on June 6th.
On the one hand, options traders fear the inevitability of a deeper correction in the Ether price, but at the same time, futures market players are not convinced to increase their bearish bets.
This level is likely a half full glass scenario as the reluctance of top traders to sell below $1,900 could provide a support level.
