Since hitting an all-time high of $ 4,870 on November 10, Ether (ETH) has seen lower lows in the past 50 days. If this downtrend continues, the lower trendline support suggests that the altcoin will bottom at $ 3,600. Still, the data on derivatives signals that professional traders are not concerned about the seemingly declining structure of the market.
Ether / USD price on FTX. Source: TradingView
Notice how the price spikes decrease over the 12-hour period as regulatory concerns rise as investors drive away from the sector. In a press conference on December 17, Russia Central Bank Governor, Elvira Nabiullina, stated that the crypto ban in the country was “quite doable”.
Nabiullina cited the frequent use of crypto for illegal operations and significant risks for retail investors. Russian President Vladimir Putin also recently criticized it Cryptocurrency by saying it is not backed by anything. Interestingly, the country plans to launch its own central bank digital currency, despite the fact that the Russian ruble has lost 44% against gold over the past four years.
In the United States, a bipartisan group of US Senators has urged Treasury Secretary Janet Yellen to change the language in the infrastructure law regarding the Requirements for reporting crypto taxes. Under the current broader definition of “broker”, miners, software developers, transaction validators, and node operators are likely to need to report digital asset transactions worth more than $ 10,000 to the Internal Revenue Service.
Despite the regulatory uncertainty and negatively skewed price action, traders should monitor the premium of futures contracts – also known as the “base rate” – to analyze how bullish or bearish professional traders are.
Pro traders are neutral despite price weakness
The basic indicator measures the difference between longer-term futures contracts and the current spot market level. An annual premium of 5 to 15% is expected in healthy markets. This price gap is caused by sellers charging more money in order to withhold settlement longer.
However, a red alert will appear when this indicator fades or turns negative, also known as “Moving Backwards”.
Ether 3-month futures base rate. Source: Laevitas.ch
Notice how the sharp drop following the 24% intraday crash on December 3rd caused the annualized futures premium to hit its lowest level in two months. After the initial panic, the ether futures market rebounded to the current 9% level, which is near the middle of the “neutral” range.
To confirm whether this move was specific to this instrument, traders should also analyze the options markets. The 25% delta skew compares similar call (buy) and put (sell) options. The indicator becomes positive when “fear” prevails, as the premium for protective put options is higher than for similar risk call options.
When market makers are bullish, the 25% delta skew indicator shifts into negative territory, and values between negative 8% and positive 8% are usually considered neutral.
Ether 30-day options 25% delta skew. Source: Laevitas.ch
In the past three weeks, the delta skew of 25% was between positive 3 and 8, which is in the neutral area. As a result, options market data confirms sentiment in the futures markets and signals that whales and market makers are not worried about the recent price weakness.
If investors “zoom out” a little, they will find that Ethers is up 300% since the start of the year.
Additionally, the total value of the Ethereum network tied to smart contracts has doubled to $ 148 billion in the past six months. This data gives derivatives traders the confidence they need to stay calm even with the current short-term price weakness.
The views and opinions expressed here are solely those of author and do not necessarily reflect the views of Cointelegraph. Every investment and trading movement involves risks. You should do your own research when making a decision.