Traders continue to say that ETH price will soon drop below $1,600, but a key trading indicator shows that most of them are reluctant to take bearish bets below $1,900.
Ether (ETH) is down 25% in just a month, and even the recent Proof-of-Stake (PoS) consensus update on the Ropsten testnet hasn’t impacted the altcoin’s price.
The merger is expected to address power consumption issues and pave the way for higher transaction performance, but an actual full Ethereum network transition is not expected before the end of the year. Ethereum developer Paritosh Jayanti also noted that there were some bugs in the PoS implementation, but these should be fixed in the coming weeks.
Luckily for Ethereum, its two main competitors have recently encountered problems of their own. The Solana Network (SOL) experienced its fifth outage of 2022 after four hours of no new blocks being produced on June 1. Each dapp was paused until the validators could resolve the issue and re-sync the network.
Most recently, Binance’s native BNB token fell 7% on June 7 after it was revealed that the U.S. Securities and Exchange Commission announced it was investigating an Initial Coin Offering (ICO) in 2017. According to Bloomberg, at least one US citizen claimed to have been involved in an ICO that could be pivotal to the SEC case.
Regulatory uncertainty could be partly responsible for the sharp ether correction. On June 6, the Hong Kong Securities and Futures Commission (SFC) issued a warning about the investment risks of non-fungible tokens. The regulator has highlighted opaque sector pricing, illiquid markets and fraud.
Options 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 when whales and arbitrage agencies are overcharging 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, 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 has been above 10% since May 22nd and recently peaked at 20% on June 3rd. These levels signal extreme fear on the part of option traders, and despite a modest improvement, the current 17% delta skew shows that whales and arbitrage agencies are not ready. take the risk of loss.
Long and short data shows several positive results
The net long-to-short ratio of leading traders excludes external factors that may have solely impacted the options markets. By analyzing these top clients’ positions in the field, in 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 struggled to hold $1,800 as support, professional traders did not change their positions between June 5th and 9th, according to the long/short indicator.
Binance saw a modest drop in the long-to-short ratio as the indicator surged from 0.99 to currently 0.96 in four days. So these traders increased their bearish bets a bit.
Huobi data paints a similar picture: on June 9, the indicator moved from 1.02 to 0.98, a small shift in favor of short positions. On the OKX exchange, the indicator fluctuated sharply during the reporting period, but remained almost unchanged at 1.35.
Related: DeFi contagion? Analysts warn of a 50% de-peg of staking ether to ether
Mixed derivatives data gives bulls hope
Overall, there was no significant change in the positions of the whales and market makers, although Ether failed to clear the $1,900 resistance on June 6th.
On the one hand, options traders fear a deeper correction in Ether price, but at the same time, futures market players are in no mood to increase bearish bets.
This reading is likely a glass half full scenario as leading traders’ reluctance to sell below $1,900 may create a support level