Derivatives traders remain confident that Ether is more likely to reclaim $ 3,800, despite being hit by a 23% correction on September 7th.

The congestion on the Ethereum network also peaked on September 7th when the average transaction fee reached $ 60 and has since been over $ 17. Because of the ongoing challenges Ethereum is facing, investors have turned to competing networks that offer bridging and Layer 2 capabilities. For example, Polkadot’s DOT is up 29% over the past week and Algorand’s ALGO is up 67%.

Undoubtedly, there is a mandate for interoperability and Layer 2 scaling solutions to respond quickly to the explosive demand for NFTs and DeFis.

It appears that the Ethereum network is currently unable to maintain its absolute leadership as the net worth of locked (TVL) in smart contracts increased from $ 13.6 billion in 2019. December 2020 to currently 82 billion US dollars.

Regulatory fears from the US are likely to dampen investor optimism about cryptocurrencies. According to a document released by the House of Representatives on September 13, lawmakers want to close a loophole that allows investors to claim capital gains deductions. Currently, the Internal Revenue Service treats cryptocurrencies as “wash-sale” investments and as such they are exempt from the 30-day redemption rules.

Ether price chart | Source: TradingView

The $ 4,000 flash test that took place on September 3 kicked the derivatives markets into high gear. The 45-day uninterrupted rally drove the Ether price up 130% from $ 1,735 on July 20th.

Ether Futures Data Shows Bulls Still “Growing Up”

The quarterly ether futures are the favorites of whales and arbitrage. They can seem complicated to retailers due to billing dates and price differences from the spot market. Their greatest advantage, however, is that the funding rate does not fluctuate.

These fixed month contracts typically trade at a slightly higher premium than the spot market, suggesting that sellers are charging more money to delay payments. Therefore, futures should be traded in healthy markets at an annual premium of 5 to 15%. This situation is known as “contango” and doesn’t just happen in the cryptocurrency market.

Ether Futures annual premium for 3 months | Source: Laevitas

As shown above, Ether futures contracts have had a decent premium of 8% since August 9th. Market traders’ derivatives remain cautiously bullish aside from a brief surge of over 15% on September 7th.

In addition, investors should also analyze the data from perpetual futures contracts. Although long (buyer) and short (seller) orders are executed at all times in each futures contract, their leverage is different.

As a result, the exchanges charge a funding rate to the side that uses more leverage to offset their risk, and that fee is paid to the counterparty.

Financing rate 8 hours for Ether Perpetual Futures contract | Source: Bybt

The data showed that the modest excitement that began to build up on September 2 lasted for less than five days. The funding rate shows that longs were the payers, but that was only a reaction to the price spike and faded when the price of ether fell on September 7th.

There are currently no signs of weakness in the ether derivatives markets and this could be interpreted as a bullish indicator. Investors continue to focus on regulatory developments and Ethereum 2.0 – which will likely solve the scalability problem well.

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Disclaimer: This article is for informational purposes only, not investment advice. Investors should research carefully before making a decision. We are not responsible for your investment decisions.

Mr. Teacher

According to Cointelegraph

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