Data shows that professional traders are somewhat skeptical about the strength of Ethereum’s rally after ETH price plunged to the $2,000 resistance level.
Ether (ETH) broke the $2,000 resistance on Aug. 14, but the solid 82.8% gain since the rising wedge started forming on July 13 certainly looks like a bull market victory. No doubt the “ultrasonic money” dream is getting closer as the network expects the merge transaction to be broadcast to the Proof-of-Stake (PoS) consensus network on September 16th.
Ether Price Index in US Dollars, 12 hour chart. Source: Trade 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 problem. The network is expected to transition to parallel processing, also known as sharding, in late 2023 or early 2024.
Regarding Ethereum bulls, the EIP-1559 combustion mechanism launched in August 2021 was necessary for ETH to become scarce, as cryptanalyst and influencer Chris Kay illustrates:
The long-awaited transition to the Ethereum Beacon Chain has drawn much criticism despite eliminating the need to support costly, energy-intensive mining activities. Below, DrBitcoinMD highlights the inability of ETH participants to withdraw their coins, leading to an unsustainable temporary supply shortage.
Undoubtedly, the drop in coins for sale caused a supply shock, especially after Ether’s recent 82.8% surge. However, these investors were aware of the risks involved in staking Eth2 and did not promise immediate post-merger remittances.
Options markets reflect dubious sentiment
Investors should study Ethereum derivatives market data to understand how whales and arbitrage tables are positioned. A skewed delta of 25% is a telling sign when traders are overstating protection up or down.
If these market participants feared a collapse in Ethereum prices, the skew indicator would rise above 12%. On the other hand, generalized arousal reflects a negative 12 percent asymmetry.
30-day ether options with a 25% delta skew: Source: Laevitas.ch
The skew indicator has remained neutral since Ethereum started the rally, even as it tested the $2,000 resistance on Aug. 14. The lack of improvement in market sentiment is a concern as ETH options traders are now assessing similar upside and downside price risks.
See also: Ethereum ICO Era Whale Address was transferred 145,000 ETH weeks before the merger
Meanwhile, long and short data shows low confidence at $2,000. This figure excludes external factors that may have solely impacted the options markets. It also collects data on the exchange’s clients’ positions on site, perpetual and quarterly futures contracts, making the position of professional traders more informed.
There are methodological discrepancies between different exchanges from time to time, so readers should follow the changes rather than the absolute numbers.
The ratio of long and short positions of the ether of the leading traders of the exchanges. Source: coin jar
Although Ethereum gained 18% from August 4-15, professional traders slightly reduced their long positions according to the long-short indicator. For example, Binance Traders Ratio improved slightly from its initial value of 1.16, but ended the period below its original level of around 1.12.
Meanwhile, Huobi saw a modest decline in the long-to-short ratio as the indicator surged from 0.98 to the current 0.96 in 11 days. Eventually, the OKX index peaked at 1.70 but rose only slightly from 1.46 on August 4th to 1.52 on August 15th. Therefore, on average, traders were not confident enough to maintain their bullish leverage positions.
Whales and market makers’ positions on leverage have not changed much despite Ether’s 18% surge since August 4th. If options traders are evaluating the same upside and downside risks for Ether, there’s likely a reason for it. 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 confident that the $2,000 resistance will be easily breached.
The views and opinions expressed herein are solely those of the author and do not necessarily reflect the views of Cointelegraph. Every investment and trading movement involves risk. they should