Metric analysis

This key Ethereum price metric shows that ETH traders aren’t as bearish as they seem

Ether (ETH) is down 25% in just one month and even the recent upgrade to proof-of-stake (PoS) consensus on Ropsten’s testnet failed to move the altcoin’s price.

The merger is intended to address power usage issues and pave the way for higher transaction output, but the actual full transition for the Ethereum network isn’t expected until later this year. Ethereum developer Parithosh Jayanthi also noted that some bugs on the PoS implementation have surfaced, but these should be fixed over the next few weeks.

Luckily for Ethereum, two of its main competitors have recently faced their own challenges. The Solana (SOL) network faced the fifth outage in 2022 after no new blocks were produced for four hours on June 1. Every decentralized application was halted until the validators were able to fix the problem and resynchronize the network.

Most recently, Binance’s native BNB token fell 7% on June 7 following news that the United States Securities and Exchange Commission announced that it had opened an investigation into the initial coin offering (ICO). from 2017. According to Bloomberg, at least one US resident claimed to have participated in the ICO, which could be crucial for an SEC case.

Regulatory uncertainty could be partly responsible for Ether’s sharp correction. On June 6, the Hong Kong Securities and Futures Commission (SFC) issued a warning notice regarding the investment risks of non-fungible tokens. The regulatory agency highlighted the sectors’ opaque prices, illiquid markets and fraud.

Options traders are still extremely risk averse

Traders should look at Ether derivatives market data to understand how larger traders are positioned. The 25% delta skew is a telltale sign whenever whales and arbitrage desks are overcharging for upside or downside protection.

If these traders fear a crash in Ether price, the bias indicator will move above 10%. On the other hand, generalized excitement reflects a negative bias of 10%. This is precisely why the metric is known as the fear and greed metric of professional traders.

Ether options 30 days 25% delta skew: Source: Laevitas.ch

The bias indicator has been above 10% since May 22 and recently peaked at 20% on June 3. These levels signal extreme fear among options traders, and despite the modest improvement, the current delta of 17% shows whales and arbitrage desks are unwilling. take a downside risk.

Long to short data show some positives

The net long/short ratio of the best traders excludes externalities which could have affected only the options markets. By analyzing the positions of these large spot clients, perpetual and quarterly futures, one can better understand whether professional traders are bullish or bearish.

There are sometimes methodological discrepancies between different exchanges, so viewers should monitor changes rather than absolute numbers.

The best traders of Ether exchanges long-short ratio. Source: Coinglass

Even though Ether struggled to maintain $1,800 as support, professional traders did not change their positions between June 5 and June 9, according to the long to short indicator.

Binance showed a slight decrease in its long/short ratio, with the indicator falling from 0.99 to 0.96 currently in four days. So, these traders slightly increased their bearish bets.

Huobi’s data shows a similar trend and the indicator moved from 1.02 to 0.98 on June 9, which was a small change in favor of the shorts. At the OKX exchange, the metric swung significantly over the period but ended almost unchanged at 1.35.

Related: DeFi contagion? Analysts Warn of Detaching ‘Staked Ether’ from Ethereum by 50%

Mixed Derivatives Data Gives Bulls Hope

Overall, there was no significant change in the leverage positions of whales and market makers despite Ether’s failure to break through the $1,900 resistance on June 6.

On the one hand, options traders fear that a deeper correction in Ether price is on the way, but at the same time, futures market participants are unconvinced to raise bearish bets.

This reading is likely a “glass half full” scenario, as top traders’ reluctance to sell below $1,900 can potentially create a support level.

The views and opinions expressed herein are solely those of the author and do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk. You should conduct your own research before making a decision.