The data shows that professional traders are somewhat skeptical about the strength of the Ethereum rally after ETH price drops to the $2,000 resistance level.
It rejected the $2,000 resistance on August 14, but the solid 82.8% gain since the rising wedge began forming on July 13 definitely looks like a bull market victory. The dream of “ultrasonic money” is undoubtedly looming, as the network expects the Merge transaction to be transferred to the Proof-of-Stake (PoS) consensus network on September 16.
Ether price index in US dollars, 12-hour chart. Source: Trading View
Some critics point out that the transition from proof-of-work (PoW) mining has been delayed for years, and the merger itself does not solve the scalability issue. The network is expected to switch to parallel processing, also known as sharding, in late 2023 or early 2024.
Regarding Ethereum bulls, the EIP-1559 burn mechanism, introduced in August 2021, was necessary for ETH to become scarce, as cryptanalyst and influencer Chris Kay demonstrates:
The long-awaited transition to the Ethereum Beacon Chain has drawn a lot of criticism despite removing the need to support costly, energy-intensive mining operations. Below, DrBitcoinMD highlights that the inability of ETH participants to withdraw their coins has created an unsustainable temporary supply bottleneck.
Especially after the 82.8% increase experienced with Ether recently, the decrease in the number of coins offered for sale undoubtedly caused a supply shock. However, these investors were aware of the risks of staking Eth2 and did not promise instant transfers after the merger.
Options Markets Reflect Suspicious Emotions
Investors should study Ethereum derivatives market data to understand how whales and arbitrage charts are positioned. A skewed delta of 25% is a decisive sign whenever traders overprice for up or down protection.
If these market participants fear a collapse in Ethereum prices, the skewness indicator rises above 12%. On the other hand, generalized arousal reflects a negative 12 percent asymmetry.
Ether options for 30 days with a delta skew of 25%: Source: Laevitas.ch
The skew indicator has remained neutral since Ethereum started the rally, despite testing the $2,000 resistance on August 14. The lack of improvement in market sentiment is somewhat worrying as ETH options traders are now assessing similar up and down price risks.
Related: Ethereum ICO Era Whale Address Transferred 145,000 ETH Weeks Before Merger
Meanwhile, the long and short data show low confidence at $2,000. This figure does not include external factors that may have affected the options markets alone. Moreover, the exchange collects data on the positions of its clients in spot, perpetual and quarterly futures contracts, thus better informing the position of professional traders.
There may be methodological differences between the various exchanges from time to time, so readers should follow the changes rather than absolute numbers.
The ratio of the long and short positions of the ether of the leading traders of the exchanges. Source: Coin glass
Although Ethereum gained 18% from August 4-15, professional traders slightly reduced their long positions, according to the long-short indicator. Binance Traders Ratio, for example, slightly improved from its initial reading of 1.16, but ended the period below its baseline of around 1.12.
Meanwhile, Huobi saw a moderate decline in the long-short ratio as the indicator moved from 0.98 to the current 0.96 in eleven days. Finally, the OKX index peaked at 1.70, but rose only slightly from 1.46 on August 4 to 1.52 on August 15. Therefore, on average, traders were not confident enough to maintain their bullish leverage positions.
Despite the 18% increase in Ether since August 4, the positions of whales and market makers in terms of leverage have not changed significantly. If options traders rate the same up and down risks for Ether, there’s probably a reason. For example, strong support for the Proof-of-Work fork will put pressure on ETH.
One thing is for sure: At this point, professional traders are not sure that the $2,000 resistance will be easily broken.
The views and opinions expressed here are those of the author alone and do not necessarily reflect those of Cointelegraph. Every investment and trading move involves risk. You should do your own research when making a decision.