Ether (ETH) hit a local high of $3,280 on Feb. 10, posting a 51.5% recovery from its session low of $2,160 on Jan. 24. This price was the lowest in six months, which partly explains why derivatives traders are so important. to lower levels.
The one-year Ether futures contract, or underlying, hit 2.5% on Feb. 25, turning the bearish trend despite an 11% gain to $2,700. The deterioration in conditions shows investor skepticism regarding the transition of the Ethereum network to the Proof of Stake (PoS) mechanism.
The long-awaited hash upgrade, which will significantly increase computing power, should go into effect in late 2022 or early 2023, Cointelegraph reports.
Ether’s long-term performance analysis makes more compelling sense as the cryptocurrency is currently 45% below its $4,870 high.
Moreover, the Adjusted Total Value of the Ethereum Blocked Network (TVL) has maintained a reasonable 42.8 million ETH despite the price correction.
The total value of the Ethereum network is locked in ETH. Source: Defillama
As shown above, the network’s TVL grew by 16.5% in three months, reflecting the growth of the decentralized finance (DeFi) and non-fungible token (NFT) markets.
However, with network upgrade delays and deteriorating global macro conditions, professional traders are becoming frustrated and worried, a sentiment that is reflected in many derivatives accounts.
Ethereum futures hit their lowest level in seven months
Retail traders generally avoid quarterly futures contracts due to fixed settlement dates and price differences from spot markets. However, the main advantage of contracts is the absence of a volatile funding rate, which means the predominance of arbitrage boards and professional traders.
These forward contracts usually trade at a small premium to the spot markets because sellers are asking for more money to hold settlement for a longer period. This mode is technically known as “contango” and is not limited to the cryptocurrency markets.
Annual installment for 3 months on Ether-Forward. Source: Laevitas
Futures contracts should trade at an annual premium of between 5% and 15% in healthy markets. However, as shown above, the Ether annual premium dropped from 20% on October 21st to 2.5%.
Although the main indicator is still positive, it has reached its lowest level in seven months. The $2,300 crash on Feb. 24 saw the bears win, and as of Feb. 25, a 10% retracement was enough to turn the tide.
So far, the data shows little sign that the bulls are ready to regain control. If so, then after such a rally, the Ether futures premium will be positive.