Traders have yet to get bearish for Ether, but a sustained drop below $ 3,000 increases the likelihood of a sentiment reversal.

Technical analysis is a controversial topic, but higher lows are often interpreted as signs of strength. On September 28, Ether could be 30% below its all-time high (ATH) of $ 4,380 on May 12, but the current $ 3,050 is 78% above the six-month low of $ 1,700. To understand whether this is an “optimistic” situation, one has to analyze the positioning of private and professional traders through the futures market.

Ether price chart | Source: TradingView

On September 24, Chinese authorities announced new measures to limit the adoption of cryptocurrencies, which resulted in the second largest Ethereum mining pool (Sparkpool) ceasing to operate on September 27. According to Sparkpool, this measure is intended to ensure the security of user resources “Regulatory Policy Requirements”.

Binance also announced that it will suspend fiat deposits and cryptocurrency trading on the spot market for users in Singapore in accordance with local regulatory requirements. Huobi, another leading spot exchange in Asia, has also announced that it will remove existing user accounts in mainland China by the end of the year.

Professional traders are neutral, but fear threatens

In order to assess whether professional traders are prone to an upward trend, one should first analyze the futures premium (base rate). This index measures the price difference between the futures contract price and the regular spot market.

The quarterly ether futures are the favorites of whales and arbitrage. It may seem complicated for retailers due to their settlement dates and the price difference to the spot market, but the biggest benefit is the lack of fluctuating funding rates.

Base rate 3-month futures contract from Ether | Source: Laevitas.ch

Three-month futures are usually traded at an annual premium of 5% to 15%, which is roughly equivalent to stablecoin loan rates. By deferring payment, the seller demands a higher price, which creates a price difference.

As noted above, the drop in Ether below $ 2,800 on September 26th caused the base rate to test the 5% threshold.

Retailers often opt for perpetual contracts (reverse swaps), which charge a fee every eight hours, depending on which side is using more leverage. Therefore, to understand whether long traders are panicking over the latest news, one needs to analyze the funding rate of the futures market.

Financing rate 8 hours Ether .Perpetual futures contract | Source: Bybt

In neutral markets, financing rates tend to fluctuate from 0% to 0.03% in a positive direction. This equates to 0.6% per week and shows that those who take long positions are paying fees.

The funding rate skyrocketed from September 1-7, but disappeared when a sudden crash resulted in the liquidation of futures contracts valued at $ 3.54 billion. Apart from a few short-lived, slightly negative values, the indicator has remained stable since then.

Both professional traders and retail investors appear unaffected by the recent test of the $ 2,800 support level. However, the situation could quickly recover and “fear” arise if Ether falls below a price level that has been stable for 52 days.

You can see the details of the ether price.

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Mr. Teacher

According to Cointelegraph

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