Ethereum’s EIP-1559 upgrade is rolling out quickly, but derivative data shows traders are less optimistic about the near-term outlook.

Derivative data shows that ether traders are less optimistic compared to Bitcoin. Although ether is up nearly 200% in the first half of 2021, compared to Bitcoin’s modest 22% gain, traders appear to have been harder hit by ETH’s recent underperformance.

Institutional investor outflow also dampened optimism on ether derivatives, ether investment vehicles suffered record outflows last week as bitcoin outflows begin to stabilize. According to the Data from CoinShares, Ether funds posted a record loss of $ 50 million last week.

Ether price (orange) vs. Bitcoin (blue) | Source: TradingView

Pay attention to the poor performance of Ether versus Bitcoin (16% difference) in June. The London hard fork is slated for July and Ethereum’s proposed EIP-1559 will cap gas tariffs. As a result, the price action for miners could be dissatisfied as the network switches from Proof-of-Work (PoW) to Proof-of-Stake (PoS).

With this in mind, ether investors have reason to be concerned as there is so much uncertainty. Perhaps miners supporting a competing smart contract chain or some other unexpected event could further negatively impact Ether price.

Whatever the current reason, the derivatives market indicators are currently signaling less confidence compared to Bitcoin.

Ether December Futures Premium shows weakness

In healthy markets, quarterly futures should trade at a premium compared to regular spot exchanges. In addition to currency risk, sellers “tie up” funds by delaying payments. The 4% to 8% premium on December contracts will be enough to offset these effects.

The same effect occurs in almost every derivatives market, although cryptocurrencies tend to have higher risks and higher premiums. However, if the futures contract trades below this range, it signals that sentiment is bearish in the short term.

Bitcoin December Futures Premium (blue) vs Ether (orange) on OKEx | Source: TradingView

The graph above shows that the Bitcoin December futures premium is recovering to 3.5% while ether contracts are being left behind. While both Bitcoin and Ether are showing a neutral to bearish indicator, there is evidence that altcoin investors are less optimistic about a near-term recovery.

Another drop will do more damage to altcoins

Another argument that could negatively affect Ether’s premium is the impact of a potentially negative 30% performance of Bitcoin. Filbfilb, an independent market analyst and co-founder of the Decentrader Trading Suite, said Bitcoin’s 30% correction could double the altcoins.

Clem Chambers, executive director of financial analysis website ADVFN, also predicts another possible decline that will mirror the crypto winter in late 2018. Chambers claims Bitcoin could drop to $ 20,000.

While general market sentiment is neutral to bearish, it seems reasonable to expect a tougher scenario for Ether, including the uncertainties surrounding the transition to the POS.

Teacher

According to Cointelegraph

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