Indicators in particular on Ethereum derivative contracts show that selling pressure is building on the asset. Will Ethereum be able to hold that crucial $1500 level?
A complicated February for Ethereum
Ethereum has had a mixed start to the year. After a good rise during the month of January, the price of the asset fell more than 10% between 8 and 10 February. Currently, Ethereum is trading around 1550 dollars according to the specialized site CoinMarketCap.
In the last 12 months, Ethey lost almost 52% of its value after a struggling crypto market. Ethereum saw its bullish push efforts repelled by powerful resistance around $1700.
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Complex context
THE recent CSS announcements re crazy or even Paxos, the issuer BUSD, are unlikely to reassure investors and traders. In fact, the regulatory context seems to be tightening and investors are asked to be cautious.
Of particular concern are the SEC’s attacks on betting through the lawsuit filed against Kraken. The consequences for DEFi may be particularly important. So it’s a vital feature to watch in the coming weeks.
On the positive side, Ethereum developers announced the pre-launch of the shanghai update on the Zhejiang test network. According to a blog post published on February 10, the move is necessary to allow validators to withdraw amounts that are locked up.
The Zhejiang testnet is the first of three testnets to implement this Shanghai upgrade. The latter should then to be launched in Marchalthough no specific date has been indicated.
What Ethereum Derivative Contracts Show Us
To begin with, it is interesting to look at the quarterly derivative contracts on Ethereum. These instruments are highly recommended by professional actors. In a market that is considered healthy, the premium of this type of contract compared to the price of the asset is generally 4 to 8%. When one notices a discount in these contracts, it generally shows bearish view on the asset.
Analysis of 3-month futures contracts on Ethereum (source: Laevitas)
Currently, we note that the futures premium fell by 4%. Therefore, the number of traders who take a long position is limited. If this does not mean that the price of the asset will necessarily fall, it is a bearish sign to consider.
To refine this analysis, it is also interesting look at the options. The delta skew is an interesting indicator here. In bear markets, options give investors a greater chance of a price drop, which does raise the skew indicator above 10%.
On the other hand, bullish markets tend to push the skew indicator below -10%, which means there is less demand for bearish markets.
The skewed delta on 30-day Ethereum options (source: Laevitas)
The skew delta flirtedwith the 10% bearish level. on February 14, which showed concern among professional traders. This is in stark contrast to the end of January, when the asymmetry index came to around 2%, indicating similar upside and downside risks.
In the end, we look through the options and futures markets of professional traders sentiment went from neutral to bearish. Fear of the second new fall, especially after the reject the $1,700 prize.
Source: CoinTelegraph
To learn more about the significant increase in Bitcoin trading at DBS, find our article here.
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