Data shows that Ethereum bears are not yet in full control
Ethereum price has been in a downtrend for the past three months and derivatives data shows that professional traders are almost ready to jump into the fray.
Ether lost support at $3,600 on Jan. 5 as results from the US Federal Reserve’s (Fed) Federal Open Market Committee (FOMC) meeting in December showed the regulator committed to balance sheet trimming and rate hikes in 2022 .
Despite its high cost, Ethereum has its own issues — namely, the average transaction fee of $40 and up. On Jan. 3, Vitalik Buterin said that Ethereum blockchain data needs to be lighter so more people can manage and use it.
Another topic covered in Buterin’s interview was the status of the Ethereum 2.0 upgrade, which is only halfway through the six years. The next phases of the roadmap include “merge” and “surge”, followed by “full sharding”. According to Buterin, once deployed, they will complete an estimated 80% of the network upgrade.
Ether price chart | Source: TradingView
Analyzing Ether’s performance over the past month, the current price looks attractive as it is 47% below its all-time high (ATH) of $4,870. However, this view ignores the 560% gain that Ether has accumulated through November 10, 2021.
Additionally, the total locked value (TVL) of the Ethereum network has dropped by 25% since Ethers ATH.
TVL on the Ethereum network | Source: Defi Llama
The TVL of the ETH network has dropped from $166 billion to the current $123.6 billion. Meanwhile, rival smart contract networks have seen TVLs like Terra grow from $11 billion to $18.7 billion and Fantom, also from $5 billion to $9 billion.
Due to network upgrade delays, deteriorating macroeconomic conditions and a three-month price correction, professional traders are clearly becoming frustrated and anxious.
Ether Futures is about to drop in price
Quarterly futures contracts are often the instrument of choice for whales and arbitrage desks because of the expiration date and price difference compared to the spot market. The biggest advantage of contracts, however, is that the funding rate does not fluctuate.
These fixed-month contracts typically trade at a small premium to the spot market, suggesting sellers are asking for more money to delay payments longer. Therefore, in healthy markets, futures should trade at an annual premium of 5% to 15%. This situation is technically defined as “contango” and is not exclusive to the cryptocurrency market.
Ether 3 Month Futures Premium | Source: Laevitas
As shown above, the ether futures premium has fallen to 5.5% from 20% on Oct. 21, just slightly above the neutral line. The basis, while still positive, has touched a six-month low.
The plunge below $3,000 on Jan. 10 was enough to shatter any bullish sentiment, and more importantly, the Ethereum network’s high fees and delayed upgrade may deter some investors.
Right now, the data shows little sign that the bears are poised to take over. When this happens, the premium on ether futures contracts becomes negative.
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Author
Analysis
Data shows that Ethereum bears are not yet in full control
Ethereum price has been in a downtrend for the past three months and derivatives data shows that professional traders are almost ready to jump into the fray.
Ether lost support at $3,600 on Jan. 5 as results from the US Federal Reserve’s (Fed) Federal Open Market Committee (FOMC) meeting in December showed the regulator committed to balance sheet trimming and rate hikes in 2022 .
Despite its high cost, Ethereum has its own issues — namely, the average transaction fee of $40 and up. On Jan. 3, Vitalik Buterin said that Ethereum blockchain data needs to be lighter so more people can manage and use it.
Another topic covered in Buterin’s interview was the status of the Ethereum 2.0 upgrade, which is only halfway through the six years. The next phases of the roadmap include “merge” and “surge”, followed by “full sharding”. According to Buterin, once deployed, they will complete an estimated 80% of the network upgrade.
Ether price chart | Source: TradingView
Analyzing Ether’s performance over the past month, the current price looks attractive as it is 47% below its all-time high (ATH) of $4,870. However, this view ignores the 560% gain that Ether has accumulated through November 10, 2021.
Additionally, the total locked value (TVL) of the Ethereum network has dropped by 25% since Ethers ATH.
TVL on the Ethereum network | Source: Defi Llama
The TVL of the ETH network has dropped from $166 billion to the current $123.6 billion. Meanwhile, rival smart contract networks have seen TVLs like Terra grow from $11 billion to $18.7 billion and Fantom, also from $5 billion to $9 billion.
Due to network upgrade delays, deteriorating macroeconomic conditions and a three-month price correction, professional traders are clearly becoming frustrated and anxious.
Ether Futures is about to drop in price
Quarterly futures contracts are often the instrument of choice for whales and arbitrage desks because of the expiration date and price difference compared to the spot market. The biggest advantage of contracts, however, is that the funding rate does not fluctuate.
These fixed-month contracts typically trade at a small premium to the spot market, suggesting sellers are asking for more money to delay payments longer. Therefore, in healthy markets, futures should trade at an annual premium of 5% to 15%. This situation is technically defined as “contango” and is not exclusive to the cryptocurrency market.
Ether 3 Month Futures Premium | Source: Laevitas
As shown above, the ether futures premium has fallen to 5.5% from 20% on Oct. 21, just slightly above the neutral line. The basis, while still positive, has touched a six-month low.
The plunge below $3,000 on Jan. 10 was enough to shatter any bullish sentiment, and more importantly, the Ethereum network’s high fees and delayed upgrade may deter some investors.
Right now, the data shows little sign that the bears are poised to take over. When this happens, the premium on ether futures contracts becomes negative.
Join CoinCu Telegram to keep track of news: https://t.me/coincunews
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