Ethereum (ETH) investors are having a tough time in 2022 as ETH has accumulated a 25% loss so far from March 17. However, the cryptocurrency has returned around $ 2,500 several times over the last two months, indicating strong support. level.
Ether / USD price on FTX. Source: Trading View
On March 15, Ethereum developer Tim Beiko announced that the Kiln test network – formerly Ethereum 2.0 – had passed an Ethereum “merger”. This process involves taking the Ethereum implementation layer from the existing Proof of Work layer and integrating it with the consensus layer in the beacon chain. The ultimate goal is to turn the blockchain into a Proof-of-Stake network.
The US Federal Open Market Committee (FOMC) raised interest rates to 0.50% on March 16, the first such move since 2018. The Monetary Authority warned against continued “upward pressure on inflation”, precisely the problem that digital scarcity of cryptocurrencies is aimed at. address. . Solve.
Investors fear that the FOMC rate hike may have a negative impact on the risk markets. For example, higher borrowing costs reduce financial incentives by counteracting business expansion and spending.
Regardless of the potential, the historical volatility of 80% to Ether changes the perception of most investors as a risky asset that will inevitably yield to a potential correction in a broader market.
Ethereum futures show moderate improvement in sentiment
To understand how professional traders position themselves, look at Ether futures and options market data. First, the underlying index measures the difference between long-term futures contracts and current spot market levels.
Ethereum futures contracts must have an annual premium of 5% to 12% to compensate traders for holding funds two to three months before the contract expires. Levels below 5% are very bearish, while readings above 12% are bullish.
Annual premium on 3-month Ether futures contracts. Source: Laevitas
The chart above shows that the Ethereum core has declined from 2% on March 13 to 3.5% at present. However, this level falls below the 5% threshold expected in neutral markets, indicating that professional traders are far from comfortable with long positions in Ethereum futures.
Thus, it can be assumed that a possible break in the resistance of $ 3,200 will surprise these investors, and create strong buying activity to cover short positions.
Option traders worried about possible fall of ETH
The daily closing price of Ethereum has fluctuated between $ 2,500 and $ 3,000 over the last 27 days, making it difficult to determine the direction of the market. In this sense, the 25% delta skew is very useful, as it shows whether arbitrage tables and market makers are inflated protection from the upside or downside.
If these traders fear a crash in the Ethereum price, the deviation indicator will rise above 10%. On the other hand, generalized excitability negatively reflects 10 percent asymmetry. This is why this calculation is known as “fear and greed” for professional traders.
Related topics: How professional Ethereum traders bet on Ethereum price increases, limiting losses
30-day Ether alternatives with 25% delta skew: Source: Laevitas
As shown above, the skew indicator has been above 10% since March 11, indicating concern as these options traders offer downside protection.
Despite the slight improvement in the premium for Ether futures, the index is still bearish. Given that the ETH options markets are expanding with higher downside risk, it is safe to conclude that professional traders are unsure whether the current $ 2500 support will hold.
However, not everything is lost for the Ethereum bulls, as the premium on cheap futures allows long positions at a low price. As long as the Ethereum network continues to address the issue of scalability, the $ 3,200 resistance may continue to be revised in light of global macroeconomic uncertainty and inflation.