On January 4th to 10th, the cost of Ethereum (ETH) rose by 10.2%, overcoming the $1,300 limit with little difficulty. In light of this, it is being asked if the Ethereum price has the potential to start a new bullish trend.
Ethereum whales, who are market makers, are no longer demanding high fees for protective put options, indicating the ETH price could be on its way to greater heights. From January 4 to 10, ETH experienced a 10.2% boost in its value, surpassing the $1,300 hurdle without much difficulty.
This raises the question of whether the altcoin is all set to start a new upward progression.
Will the previous resistance to Ethereum become a backing point?
On the first of January, Ether’s $1,200 support was tested, and since then the eight-week ascending channel has demonstrated its strength.
However, crypto bulls are anxious that negative news could break the pattern to the downside. The sentiment around Ethereum and other cryptocurrencies has not been inspiring, for instance on January 8, Xiao Yi, a former Chinese Communist Party secretary of Fuzhou, admitted that he acted irresponsibly in relation to crypto mining and was sorry for the losses he caused in the Fuzhou area.
Similarly, on the 10th of January, the South Korean tax authorities carried out a raid on Bithumb’s exchange offices to investigate a potential case of tax evasion. On December 30th, Park Mo (an executive at Bithumb’s parent organisation) was found deceased while he was being investigated for embezzlement and stock price manipulation.
Cameron Winklevoss, the co-founder of the Gemini exchange, issued an open letter to Barry Silbert (CEO of Digital Currency Group (DCG)) on January 10th, making serious allegations of fraud and requesting the Grayscale fund management holding company to dismiss Silbert in order to resolve Gemini’s Earn users’ issues. The ongoing crypto winter made another dent on the 10th of January as the leading US cryptocurrency exchange Coinbase announced a second round of layoffs, impacting 20% of their staff. Brian Armstrong, the CEO of Coinbase, tried to downplay the situation by saying that Coinbase remains “well capitalized” and that it is business as usual.
This has made some investors fear that Ether prices could decline below $600, as fear remains the prevailing emotion. For instance, trader Crypto Tony believes that the current triangle formation could cause another “leg down later this year.” Looking at Ether derivatives data, one can see if the bearish news has put off traders from engaging in leveraged longs and neutral-to-bullish option strategies.
Investors who had borrowed money to buy stocks failed to keep pace with the current surge in the market.
Retail investors tend to stay away from quarterly futures because of their price difference with the spot market. At the same time, professional traders favor these assets as they reduce the inconsistency of funding costs in a perpetual futures agreement.
As per healthy markets, the two-month futures annualized premium should be somewhere between +4% and +8%, to cover costs and applicable risks. When the futures trade at a discount in comparison to regular spot markets, it indicates a lack of confidence from leverage buyers, which is an indication of a bearish market.
The chart above exemplifies that Derivatives traders using Futures contracts left the negative premium on January 1st, which implies that the pessimistic attitude has vanished. Nevertheless, the current 1.5% premium is still beneath the 4% benchmark for a neutral market. Thus, this does not mean that traders are expecting a sudden downturn in the market. Consequently, traders should evaluate Ether’s options markets to get an idea of whether investors are accurately pricing in a potential $600 retest for ETH.
Traders who buy and sell options have ceased charging exorbitant fees for protection against losses.
A 25% delta skew is a warning sign when market makers and arbitrage brokers are overcharging for either downside or upside security. During bearish markets, investors attach greater likelihood of a price decline, causing the skew indicator to reach 10% and higher. Contrarily, in bullish markets, the skew indicator is likely to be below -10%, suggesting that bearish put options are discounted.
At the moment, the delta skew is at 11%, which is not far from neutral, indicating that whales and market makers are no longer charging excessive premiums for protective put options. This is a drastic contrast to late 2022 when these trades cost around 19% more than equivalent bullish strategies using options.
Generally, both options and futures markets appear to show that pro traders are becoming more confident and the likelihood of $1,300 being a support level is increasing. This implies that despite the lack of encouraging news, traders appear to be less interested in bearish bets, which may propel further positive motion for Ether.