Ethereum Price - What Does Futures & Options Trading Data Reveal?

Ethereum Price - What Does Futures & Options Trading Data Reveal?

2022-01-13 | Daniel Smith

Ethereum Price - What Does Futures & Options Trading Data Reveal?

Ethereum (ETH) has been an unbelievable experience over the last three months, owing to two price rallies. First, it reached a high of $4,870 on November 10 and a low of $4,780 on December 1. Nevertheless, the double peak was swiftly accompanied by a strong denial, resulting in the liquidation of $490 million in long futures contracts in 48 hours.

On December 8, Ethereum began to surge 28.5 percent in four days to retake the $4,400 support, instilling optimism once more. Shortly after, the slump persisted, culminating in the $2,900 low on January 10, the weakest ETH price in 102 days. This low was a 40% drop from the all-time high of $4,870, prompting traders to wonder if a bear market had begun.

One could make the argument that Ether is merely going to follow Bitcoin's 42 percent correction from its all-time high of $69,000 on November 10 and that the another very latest pullback has been partly credited to the United States Federal Reserve's perspective monetary tightening policy initiatives as well as the effect of Kazakhstan's political unrest on mining.

This oversimplified approach ignores important events, including China's authorized digital yuan wallet being the most downloaded application in regional smartphone app stores on January 10. In addition, a prototype edition of the country's central bank digital currency (CBDC) is being utilized in certain locations, and it became accessible for installation on app stores on January 4.

Futures traders are getting increasingly concerned

 

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ETH/USD 1 DAY PRICE CHART: SOURCE - COINMARKETCAP.COM

The foundation signal monitors the gap among longer-term futures contracts and presents spot market values. In strong markets, an annualized premium of 5% to 15% is predicted. This price disparity is generated by sellers requesting additional money in order to postpone payment for a longer period of time.

A red signal, on the other hand, appears anytime this indication diminishes or goes negative, a condition described as "backwardation."

Take note of how the signal peaked at 20% on Nov. 8 when Ethereum crossed $4,800, but then progressively disappeared completely to an 8% low on Dec. 5 as ETH flash plummeted to $3,480. More significantly, when Ether fell to a low of $2,900 on January 10, the basic rate fell to 7%, its lowest level in 132 days.

Options traders lately changed their stance to neutral

To rule out futures-specific externalities, one need also examine the options marketplaces. The delta skew of 25% contrasts identical call (buy) as well as put (sell) options. When anxiety is common, the measure will become favorable since the premium for defensive put choices is larger than the premium for comparable hazard call choices.

When avarice is dominant, the 25 percent delta skew signal shifts to the declining stage.

When market participants, as well as whales, are bearish, the 25 percent delta skew indicator goes to the bright side, and values between -8 and +8 percent are considered neutral.

On January 8, ether option traders went into "panic mode" after the 25 percent delta skew crossed the 8% mark, culminating at 11 percent two days afterward. The fast rebound from the $2,900 low, on the other hand, boosted trust among Ether options traders while simultaneously lowering the choices "fear and greed" index to a measly 3%.

At the present, there is zero agreement among Ethereum traders in terms of attitude, since futures markets show some unhappiness while options arbitrage desks and whales have lately ditched their pessimistic posture. This seems reasonable since the present $3,200 price still reflects the previous 15% weekly loss and is uninspiring.

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