Expectations of tighter regulations and further FTX contagion continue to weigh on ETH prices, but derivatives are showing modest improvement in sentiment.
Ether
ETH
Tickers down
$1,577
They rallied 5.5% in the early morning hours of November 29, reclaiming key support at $1,200. However, when analyzing a broader time frame, a negative performance of 24% over the last 30 days weighs heavily on investor sentiment. Additionally, investor sentiment soured after BlockFi filed for bankruptcy on Nov. 28.
The news flow remained negative after the United States Treasury’s Office of Foreign Assets Control (OFAC) announced a settlement with crypto exchange Kraken for “clear violations of sanctions against Iran.” In a Nov. 28 announcement, OFAC said Kraken agreed to pay more than $362,000 to settle its civil liability.
Also on November 28, institutional crypto-financial services provider Silvergate Capital denied rumors of significant exposure in BlockFi’s bankruptcy. Silvergate added that its digital asset losses were less than $20 million and reiterated that BlockFi is not a custodian of crypto-collateralized loans.
Traders fear Ether will fall below $800 if the bear market continues. An example from crypto Twitter trader Il Capo of Crypto:
Let’s take a look at Ether derivatives data to understand if worsening market conditions have affected crypto investor sentiment.
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Professional traders are slowly coming out of panic levels
Quarterly futures are generally avoided by retail traders due to price differences from spot markets. They are the preferred instruments of professional traders because they prevent the fluctuations in funding rates that often occur in a perpetual futures contract.
Two-month futures should trade at +4% to +8% in healthy markets to cover annual premium costs and associated risks. So when futures trade at a discount in the regular spot markets, it shows a lack of confidence from leveraged buyers – a bearish indicator.
Annual Ether Futures Premium 2 months. Source: Levitas
The chart above shows that derivatives traders remain bearish as ether premium futures are negative. However, it showed at least some improvement on November 29. Bears can highlight how far we are from a 0% to 4% premium, but the consequence of a 71% drop in one year carries a lot of weight. .
However, traders should also analyze the Ether options markets to avoid outliers specific to the futures instrument.
Options traders do not expect a quick rally
A delta slope of 25% is an indicator when markets and arbitrage bureaus are overdoing upside or downside protection.
In bear markets, option investors place a high probability of shorting the price, causing the skewness indicator to rise above 10%. On the other hand, bullish markets tend to move the skewness indicator below -10%, which means that bearish market options are reduced.
Ether 60-Day Options 25% Delta Skew: Source: Levitas
Delta skew has narrowed over the past week, indicating that options traders are more comfortable offering downside protection.
With a 60-day delta skew of 18%, whales and market makers are more likely to lower the price of Ether. As a result, the options and futures markets indicate that professional traders fear a retest of the $1,070 lows as a natural run for ETH.
On an optimistic note, data from on-chain analytics firm Glassnode shows that the November 2022 sale was the fourth largest turnover for Bitcoin.
BTC
Tickers down
$22,947
. This move led to a loss of $10.2 billion in seven days.
As a result, the capitulation of Ether holders has passed, and those now making bullish bets – defying ETH’s derivative metrics – will finally exit.
