Pro Trader is down against ETH despite recovering $2,800

Ether (ETH) hit a local high of $3,280 on Feb. 10, a 51.5% recovery from $2,160 on Jan. 24. It was a six-month low and I think it solved part of the reason derivatives traders’ sentiment gauges are falling sharply lower.

Ether price chart | Source: Trade View

The annual premium for ether futures (basis) hit 2.5% on Feb. 25, reflecting a bearish bias despite the price rising 11% to $2,700. The deteriorating situation shows that investors are skeptical about the Ethereum network’s move to Proof-of-Stake (PoS).

According to the report of Bitcoin Magazinean expected sharding upgrade that can significantly increase processing capacity and will come into effect in late 2022 or early 2023.

Analyzing Ether price action from a long-term perspective looks more attractive as it is currently 45% below its all-time high (ATH) of $4,870.

Furthermore, the total value (TVL) of the Ethereum network has held a reasonable 40.62 million ETH despite the price correction.

Total locked value of the Ethereum network in ETH | Source: Defillama

As shown above, the network’s TVL grew by 16.5% in three months, reflecting the growth of the DeFi and NFT markets.

However, due to the delay in network upgrade and deteriorating global macro conditions, professional traders are becoming frustrated and anxious, a mood reflected in many gender indices.

Ether futures are most bearish in 7 months

Retailers typically avoid quarterly futures contracts due to fixed settlement dates and price differentials to the spot market. However, the biggest advantage of these contracts is the lack of funding rates, the popularity of arbitrage desks and professional traders.

These fixed month contracts typically trade at a lower premium to define the market as sellers charge more money to hold payments longer. This situation is technically called “contango” and is not exclusive to the cryptocurrency market.

3-month annual premium for ether futures | Source: Laevitas

A healthy market will have an annual premium that ranges from 5% to 15%. However, as shown above, Ether’s annual premium has fallen from 20% on Oct. 21 to 2.5% today.

The annual futures premium, while still positive, has fallen to a seven-month low. Ether’s price drop to $2,300 on February 24 let bearish sentiment prevail and even the February 25’s 10 percent rally was not enough to turn the tide.

For now, the data shows the bulls are less likely to regain control. In this case, the ether futures premium would turn positive after such a rally.

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