After a brief overshoot above $2,000 on May 6, the Ether (ETH) price has returned to the tight range between $1,820 and $1,950, which has been the norm for the past three weeks.

According to the latest Ether futures and options data, odds favor the Ether price breaking below the $1,820 support as professional traders have been unwilling to add neutral-to-bullish positions using derivatives contracts.

Not even the memecoin frenzy that has boosted Ethereum network demand was able to instill confidence in investors. The average Ethereum transaction fee skyrocketed to $27.70 on May 6, the highest in 12 months, according to BitInfoCharts data. As reported by Cointelegraph, one of the main drivers behind the increase was the insatiable demand for Pepe (PEPE), among other memecoins.

Moreover, the increased gas fees have driven users to layer-2 solutions, which could be interpreted as a weakness. For instance, it causes a decline in the total value locked (TVL) by removing deposits from the Ethereum chain, especially in decentralized finance (DeFi) applications.

Some analysts believe the $30 million Ether sale by the Ethereum Foundation contributed to ETH being unable to break above $2,000, as nearly 20,000 ETH were sent to the Kraken cryptocurrency exchange. The foundation’s last relevant transfer occurred in November 2021, when the price topped around $4,850 and subsequently declined by 80%.

On the macroeconomic side, the 4.9% U.S. April Consumer Price Index (CPI) data announced on May 10, slightly below consensus, further increased investors’ expectations of stable interest rates at the next Federal Reserve (Fed) meeting in June. CME Group’s FedWatch tool showed 94% odds of stability at the current 5% to 5.25% range.

Therefore, with no signs of a Fed pivot on the horizon, the demand for risk-on assets such as cryptocurrencies should remain under pressure. But, if investors fear that Ether has higher odds of breaking the 3-week sideways movement to the downside, this should be reflected in the ETH futures contract premium and increased costs for protective put options.

Ether futures reflect weak demand from longs

Ether quarterly futures are popular among whales and arbitrage desks. However, these fixed-month contracts typically trade at a slight premium to spot markets, indicating that sellers are asking for more money to delay settlement.

As a result, ETH futures contracts in healthy markets should trade at a 5 to 10% annualized premium — a situation known as contango, which is not unique to crypto markets.

Ether traders have been extremely cautious in the past week, as there was no surge in demand for leverage longs during the recent rally above $2,000 on May 6. Presently at 1.4%, the ETH futures premium reflects a complete lack of appetite from buyers using derivatives contracts.

Ether options risk metric stood neutral

Traders should also analyze options markets to understand whether the recent correction has caused investors to become more optimistic. The 25% call-to-put delta skew is a telling sign when arbitrage desks and market makers overcharge for upside or downside protection.

In short, if traders anticipate an Ether price drop, the skew metric will drop below 7%, and phases of excitement tend to have a positive 7% skew.

Related: Arbitrum’s DAO to receive over 3,350 ETH revenue from transaction fees

As displayed above, the ETH options’ 25% call-to-put delta skew has been neutral for the past two weeks, as the protective put options were trading at a fair price relative to similar neutral-to-bullish call options.

Ether options and futures markets suggest that pro traders are not confident, especially considering the 10.6% rally between May 2-6. Therefore, the weak derivatives indicators are more likely to flip bearish if the 3-week sideways movement breaks to the downside.

In other words, if Ether price breaks below $1,820, one should expect a much higher appetite for bearish bets using ETH derivatives, an indicator of distrust and a lack of demand for longs.

This article is for general information purposes and is not intended to be and should not be taken as legal or investment advice. The views, thoughts, and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.

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Ether (ETH) price has shown weakness after failing to break above the $1,950 resistance on April 26. The subsequent correction drove ETH to $1,810 on May 1, nearing its lowest level in four weeks. Curiously, the movement happened while the First Republic Bank (FRB) was closed by the California Department of Financial Protection and Innovation.

Curiously, the movement happened while the First Republic Bank (FRB) was closed by the California Department of Financial Protection and Innovation.

The Federal Deposit Insurance Corporation (FDIC) entered into a purchase and assumption agreement with JPMorgan to protect FRB depositors, estimating a $13 billion loss.

Regarding this latest major U.S. bank failure, UBS analyst Erika Najarian stated,

“This deal does not change the rates, recession, and regulatory headwinds that regional banks are facing.”

ETH price ignores banking crisis

Curiously, the VIX indicator, which measures how traders are pricing the risks of extreme price oscillations for the S&P 500 index, reached its lowest level in 18 months at 15.6% on May 1.

It is worth noting that overconfidence is the main driver for surprise moves and large liquidations in derivatives markets, meaning low volatility does not necessarily precede periods of price stability.

The economic environment has worsened significantly after the U.S. reported its first quarter gross domestic product (GDP) growth of 1.1%, below the 2% market consensus. Meanwhile, inflation in Germany remained exceptionally high at 7.6% year-over-year in April. Investors are now pricing higher odds of a global recession as the U.S. Federal Reserve is expected to raise interest rates above 5% on May 3.

Meanwhile, inflation in Germany remained exceptionally high at 7.6% year-over-year in April. Investors are now pricing higher odds of a global recession as the U.S. Federal Reserve is expected to raise interest rates above 5% on May 3.

According to fundamental macro analyst Lyn Alden, the U.S. Treasury is now targeting $1.4 trillion in new net borrowing between April and September 2023 as tax receipts have been running below expectations.

The U.S. Treasury updated their borrowing estimates.

They target over $1.4 trillion in net new borrowing during the two quarters from April through September 2023, with an ending cash balance target of $600 billion.

Tax receipts have been coming in below their expectations. pic.twitter.com/qnA6QFqx4m

— Lyn Alden (@LynAldenContact) May 1, 2023

If the U.S. debt level continues to increase while interest rates remain high, the government will be forced to increase debt payments, further pressuring its delicate fiscal situation. Such a situation should be positive for scarce assets, but what can Ethereum derivatives metrics tell us about professional traders’ risk appetite? Let’s take a look. 

Ethereum derivatives display modest confidence

Ether quarterly futures are popular among whales and arbitrage desks, and they typically trade at a slight premium to spot markets, indicating that sellers are asking for more money to delay settlement for a longer period.

As a result, futures contracts on healthy markets should trade at a 5% to 10% annualized premium — a situation known as contango, which is not unique to crypto markets.

Since April 19, the Ether futures premium has been stuck near 2%, indicating that professional traders are unwilling to flip neutral despite ETH price testing $1,950 resistance on April 26.

The absence of demand for leverage longs does not always imply a price decline. As a result, traders should investigate Ether’s options markets to learn how whales and market makers value the likelihood of future price movements.

Related: Venmo will enable fiat-to-crypto payments in May

The 25% delta skew indicates when market makers and arbitrage desks overcharge for upside or downside protection.

In bear markets, options traders increase their odds of a price drop, causing the skew indicator to rise above 8%. Bullish markets, on the other hand, tend to drive the skew metric below -8%, indicating that bearish put options are in less demand.

The 25% skew ratio is currently at 1 as protective put options are trading in line with the neutral-to-bullish calls. That’s a bullish indicator given the six-day 7.8% correction since ETH price failed to break the $1,950 resistance.

So far, Ethereum’s price has failed to display strength while the baking sector created a giant opportunity for decentralized financial systems to showcase its transparency and resilience versus traditional markets. On the other hand, derivatives metrics show no sign of extreme fear or leveraged bearish bets, indicating low odds of retesting the $1,600 support in the near term.

This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.

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press release

PRESS RELEASE. Victoria, Seychelles, April 26th, 2023 — Bitget, top crypto derivatives and copy trading platform, has announced the addition of Liquid Staking Derivatives (LSDs) as a margin option for Bitget Coin-margined Futures, making it the first centralized exchange to provide such products on the market. This new feature will allow traders to continue earning staking rewards while also utilizing their staked assets for trading purposes.

Bitget Coin-margined Futures is a unique product designed for crypto-enthusiasts, supporting multiple currencies as a margin for various futures trading pairs. With the introduction of LSDs as collateral, traders can now access the liquidity of staked assets without having to unstake them. Currently, Bitget supports stETH as collateral for the first rollout, and plans to expand support for more assets for LSDs collateral in the future.

Using LSDs as a margin offers a range of benefits for cryptocurrency traders. It provides increased flexibility and diversification, helping users manage risk more effectively and potentially offering a more efficient way to use staked assets for trading. This can be particularly advantageous for traders looking to expand their trading strategies beyond holding or staking cryptocurrencies. Furthermore, using LSDs as a margin can help investors increase the liquidity of staked assets. By earning staking rewards while providing liquidity for trading, LSDs can create a more vibrant trading ecosystem and potentially increase the overall value of staked assets.

“With this latest addition, Bitget continues to solidify its position as the leading crypto derivatives trading platform with multiple innovative products. Traders can now take advantage of this new feature by logging into their Bitget account and selecting LSDs as a margin option. By offering LSDs as a margin option, we are giving our users greater flexibility and more diverse trading strategies, which we believe will drive further innovation and growth in the cryptocurrency derivatives market. We are proud to be the first exchange to offer this cutting-edge feature and are excited to continue leading the way in providing our users with the most advanced trading tools and options.“ said Gracy Chen, Managing Director of Bitget.

Bitget is a top crypto derivatives exchange, which launched the first USDT-margined futures and USDC-margined products in the industry. According to Coingecko, Bitget is currently a top 5 futures trading platform supporting 170+ futures trading pairs.

About Bitget

Established in 2018, Bitget is the world’s leading cryptocurrency exchange with futures trading and copy trading services as its key features. Serving over 8 million users in more than 100 countries and regions, the exchange is committed to helping users trade smarter by providing a secure, one-stop trading solution. Bitget inspires individuals to embrace crypto through collaborations with credible partners, including legendary Argentinian footballer Lionel Messi, the leading Italian football team Juventus, and official eSports events organizer PGL. According to Coingecko, Bitget is currently a top 5 futures trading platform and a top 10 spot trading platform.

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