In this period of uncertainty, analysts do not know if Ethereum will be able to maintain the $1,200 level. On the traditional market side, the S&P 500 is approaching its critical support of 3,900 points. The correlation of the crypto market with the equity market does not benefit ETH and the data on the derivatives of the latter suggests that the decline continues.
The level $ 1300 difficult to cross
After a market rally, mostly seen in Bitcoin, Ehtereum and the top 10 market, it is time for a bearish rally to surface. ETH was up 11.3% between November 28 and December 5, hitting a temporary high at $1,300 (before falling 4.6%). the $1,300 level it functions as resistance for twenty-six daysso it is not surprising to see Ethereum correcting below this level right now and in the coming days.
Ethereum/USD, time unit 12h – Source: TradingView
Currently, ETH is trading around $1223, or 12% above the minimum of $1070 reached on 22 November. Do not cross 1300 resistance $ it is a failure for investors and traders. Therefore you will still have to wait for the resumption of ETH’s bullish trend in the short term.
Bullish sentiment in the market worsened after three members of the US Senate sought information from Silvergate Bank regarding its relationship with FTX. Lawmakers questioned the bank after reports suggested Silvergate facilitated the transfer of funds from FTX customers to Alameda. Lawmakers have given the US bank until December 19 to respond.
On December 5, NBC News reported that Silvergate claimed to be a victim of FTX and Alameda Research, which “may have misused client assets and made other errors in judgment.” As negative news continues to pile in, the Financial Times reported yesterday that the UK Treasury is finalizing a number of guidelines aimed at restricting the sale of cryptocurrencies from abroad.
A good number of people fear that ETH will lose the $1,200 support. But according to trader CashMontee, the S&P 500 stock index will be key. He points out that the market is “too energetic” at the moment.
nah deal too fast i think. As long as spx stays up it will also be encrypted. Monthly level at 1205 which I think will be tagged after but we haven’t taken enough liquidity yet to fall back but of course could be wrong
— CashMontee (@CashMontee) December 5, 2022
A bearish view observed on the future of ETH
In general, traders avoid retail forward (future) contracts because of their price difference from the spot (cash) market. On the other hand, professional traders prefer these instruments because they avoid fluctuations in the funding rate.
The annual premium for two-month futures should trade between +4% and +8% in a bullish market to cover the associated costs and risks. However, when futures trade at a discount to regular spot markets, it reflects a lack of confidence by leveraged buyers. He is a true bearish indicator.
Annual 2 month ETH futures premium – Source: Laevitas.ch
The chart above shows that derivatives traders are still bearish as the ETH futures premium is negative.
Options traders are not afraid of the downside
The 25% delta of the Skew it is a sign when market makers and arbitrage offices overcharge for upside or downside protection. Skew is the term used for the difference i implied volatility (IV) between the calls and the put of the same deadline.
In a bear market, option traders place more odds on a price decline, causing the indicator to break a bias above 10%. Conversely, bullish markets tend to push the skewness indicator below -10%, which means that puts (short) are discounted.
A skewed look at Ethereum 2 month options – Source: Laevitas.ch
The delta skew has stabilized over the past week, indicating that options traders are more comfortable with downside risk. With a 60-day delta standing at 12%, whales and market makers are feeling neutral on Ethereum. The IS options markets and futures contracts point out that professional traders are expecting a retracement of $1,200.
As cryptocurrencies and the stock market become more correlated, the answer may well be hidden in the future of the global economy. So it will be interesting to watch the market after the following events:
- gross domestic product (GDP) of the euro area and Canada on December 7;
- US Consumer Price Index (CPI) on December 13;
And generally follow:
- future inflation announcements from the SEC and Jerome Powell;
- evolution of cryptocurrency regulation around the world.
Currently, the odds are in favor of a decline in ETH as the news suggests the possibility of tighter regulation in the crypto market.
To learn more about Ethereum find our article:
