Professional traders are unimpressed by the current bearish structure of ether
Since hitting an all-time high (ATH) of $ 4,870 on November 10, Ether price has hit lower lows throughout the past 50 days. If this trend continues, it will likely bottom out at $ 3,600.
However, the data on the derivatives market signals that professional traders are not concerned about the current bearish structure of the market.
Ether / USD price chart | Source: TradingView
Local highs keep getting lower over the 12 hour period as growing regulatory concerns drive investors off the market. During a press conference on December 17, the governor of Russia’s central bank, Elvira Nabiullina, announced that the country is aiming to ban cryptocurrencies entirely.
Nabiullina cited the frequent use of cryptocurrencies for illegal activities and poses significant risks for retail investors. Russian President Vladimir Putin also recently criticized cryptocurrencies, saying that there is nothing to back them up. Interestingly, the country is planning to introduce a central bank digital currency, even though the country’s ruble has lost 44% of its value against gold over the past 4 years.
In the United States, a bipartisan group of U.S. Senators has urged Treasury Secretary Janet Yellen to clarify the language in the infrastructure law regarding crypto tax reporting. Under the current “broker” definition, miners, software developers, transaction validators, and node operators are likely to need to report more valuable digital asset transactions of $ 10,000 to the Internal Revenue Service (IRS).
Even with regulatory uncertainty and uncertain price developments, traders should keep an eye on futures premiums – also known as “base rates” – to analyze whether traders have professional upward or downward trends.
Professional traders are neutral
The basic indicator measures the difference between a long-term futures contract and the current price on the spot market. An annual premium of 5 to 15% is expected in healthy markets. This difference in price is due to the fact that the seller is charging more money in order to delay the payment longer.
However, a red alert always pops up whenever this indicator fades or turns negative, also known as “moving backwards”.
Basic ether course for 3 months | Source: Laevitas.ch
Note that the 24% decline on December 3rd drove the annual futures premium to a two-month low. After the initial panic, the ether futures market has recovered to + 9% for the time being, near the middle of the “neutral” zone.
To confirm whether this move is critical, traders should also analyze the options markets. The 25% delta deviation compares similar call and put options. The indicator becomes positive when “fear” prevails, as the put premiums are higher than for calls with similar risks.
When market makers are bullish, the 25% delta deviation indicator becomes negative, and indicators between -8% and 8% are generally considered neutral.
Ether. 30-day delta 25% deviation option | Source: Laevitas.ch
In the last three weeks the 25% delta deviation fluctuated between +3 and +8, which is in the neutral range. The options market data thus confirm the sentiment on the futures market and signal that whales and market makers are not worried about the recent price weakness.
If investors zoom out a bit, they will find that Ether’s year-to-date earnings are 300%, and this explains why professional traders are not concerned about a 20% drop from the ATH of $ 4,870.
In addition, the total value of the Ethereum network in smart contracts has doubled to $ 148 billion in the past six months. This data gives derivatives traders the security they need to stay calm even when there are short-term signs of weakness.
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