Ethereum fundamentals are still going strong, so why are professional traders pessimistic about ETH?
Ether (ETH) has outperformed Bitcoin (BTC) by 32% since May, and despite a steady stream of bullish reports from JPMorgan Chase and Goldman Sachs, derivative indicators are showing bearish factors on both traits.
Ether and Bitcoin prices have been changing since May | Source: TradingView
Bitcoin is trading 41 percent below its all-time high of $ 64,900, a move that has brought its “fear and greed index” to its lowest level since March 2020. With retailers fearing a decline, global investment firm Guggenheim Investments has the US Securities and Exchange Commission (SEC) for a new fund that could seek exposure to Bitcoin.
Billionaire investor Stanley Druckermiller reiterates his optimistic stance on Bitcoin:
“I think Bitcoin won the store of value game because it’s a brand, has been around for 13-14 years, and has limited supply.”
The dynamics of the Ethereum network are excellent
Ethereum outperforms Bitcoin in terms of miners’ income and network value traded, a report by Goldman Sachs shows. They believe that ether “has a high chance of outperforming Bitcoin as a leading store of value”. The report noted the evolution of the decentralized financial sector (DeFi) and the non-fungible token (NFT) ecosystem built on top of Ethereum.
Income from Bitcoin and Ethereum network miners | Source: CoinMetrics
Notice how Ethereum miners ‘earnings significantly outperformed Bitcoin miners’ earnings in May, hitting a daily average of $ 76 million. This has exceeded Bitcoin miners’ earnings of $ 45 million, which includes a subsidy of 6.25 BTC per block plus transaction fees.
A similar situation occurs with the amount traded and transmitted on each network. For the first time ever, Ethereum offers a significant advantage according to this metric.
Average daily transactions on Bitcoin and Ethereum networks | Source: CoinMetrics
The graph above shows that the Ethereum network handles an average of $ 25 billion per day, which is 85% higher than Bitcoin. Stablecoins certainly play an important role, but a net worth of $ 50 billion is locked into DeFi applications.
Futures contract premium slightly reduced giảm
When measuring futures premiums, both Bitcoin and Ether have similar discounts. The base rate measures the difference between a long-term futures contract and the current spot market level.
One-month futures contracts are usually traded at a premium of 10 to 20% over regular spot trades to warrant a lock instead of an immediate payout.
Annual premium (base) of Bitcoin and Ether futures on OKEx | Source: Skew
As described above, futures premiums have fallen below 10% for both Bitcoin and Ether since the May 19 crash. This shows a slight downward movement, albeit far from a negative indicator known as a retracement.
Ether’s 25% delta deviation signals “fear”
To gauge how optimistic ether traders are, look at the 25% delta deviation. The index becomes positive if the neutral to bearish put option premium is higher than that of calls with similar risk. This situation is often referred to as the “fear” scenario. On the other hand, negative deviations lead to higher premium costs and lead to an upward trend.
25% delta deviation of the ether option | Source: Laevitas
Similar to the futures premium, the 25% delta deviation of the ether option has fluctuated over 10% since May 19. This shows that market makers and whales are unwilling to defend themselves against a fall in prices and show “fear”.
Despite staying away from a major downward move, both ether derivatives market indicators point to a complete lack of bullish bias despite their gains of up to 270% since the start of the year.
Given these disappointing data, some analysts will see “optimism and hope” as they leave room for positive surprise. Ethereum’s proposed improvement EIP-1559, planned for July, will generate a basic network fee that will fluctuate depending on network demand. The update also suggests burning transaction fees, introducing deflation into the Ethereum ecosystem.
OKEx analyst Rick Delaney claims that “it could make the asset more attractive to the world’s richest investors”.
According to Cointelegraph