Traders predicted the price of Ethereum to be $3,000, but derivative data suggests that this is not the case

Ether (Ethereum) Has risen 35% in the past ten days and regained the key $2,300 support level, but the key local high of $2,450 has not been tested since June 17. Part of the recent recovery is due to the London hard fork, which is expected to continue live on August 4.

Traders and investors view EIP-1559 released As a bullish factor in the price of Ether, because it is expected to reduce Gas fees. However, Ethereum miners are not excited about this proposal, because the proof-of-work model will no longer be needed after ETH2.0 goes online.

The network fee will be set automatically, but users can choose to pay additional fees for faster confirmation. Miners (or future validators) will receive this additional fee, but the basic fee will be destroyed. In short, Ethereum is expected to be deflationary.

Bitstamp’s Ether price (in U.S. dollars). Source: TradingView

Although it is difficult to determine the main drivers of the recent rebound, the sentiment of professional traders can be measured by analyzing derivatives indicators.

If recent price changes are sufficient to instill confidence, then futures contract premiums and option deviations should clearly reflect this change.

Even if the futures contract enters a positive spread, the bullish sentiment is gone

By analyzing the price difference between the futures contract and the conventional spot market, it is possible to better understand the general sentiment of professional traders.

The annualized premium of 3-month futures in the neutral to bullish market should be 6% to 14%, which is consistent with the loan interest rate of stablecoins. By delaying settlement, sellers demand higher prices, which leads to a premium.

Whenever the futures premium drops or becomes negative, it will send a worrying red flag. This situation is also known as an inverse spread, which indicates the presence of bearish sentiment.

OKEx’s September Ether futures premium. Source: TradingView

The above chart shows that as the ether tested the support level of $1,750, the premium of ether futures turned negative on July 20. However, even if it rose sharply to US$2,450, it would not be enough to make the September contract premium exceed 1.3%, which is equivalent to an annualized 8%.

If there is some excitement, the annualized futures premium will reach 12% or more. Therefore, the position of professional traders now appears to be neutral and bearish.

In order to eliminate the unique externalities of futures instruments, traders should also analyze the options market.

The options market confirms that professional traders are not bullish

Whenever market makers and whales are bullish, they will demand a higher call option (buy) option premium. This will cause the 25% delta skew indicator to move negatively.

On the other hand, whenever the cost of downside protection (put options) is higher, the 25% delta skew indicator will become positive.

The 25% delta skew of the 1-month Ether option. Source: laevitas.ch

Readings between minus 10% and plus 10% are usually considered neutral. This indicator has been sending out a “fear” signal from May 20 to July 19, but it quickly improved after maintaining the $1,750 support level.

Nevertheless, the current 25% delta skewness of negative 4 is not enough to configure the “greedy” indicator. Option market pricing currently strikes a good balance between call (buy) and put (sell) options.

Both of these derivatives indicators indicate that professional traders gradually exited the “fear mode” on July 20, but they are far from bullish.

At present, from the perspective of these indicators, there is little confidence in the recent rebound, which is understandable considering the risks of the upcoming hard fork and the uncertainty caused by unsatisfied miners.

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