The sentiments of traders improved significantly after the 7.5% increase in the price of Ethereum between 10 and 14 Mehr. However, a closer look at the futures and options contracts shows that the recapture of the $1,350 range was not enough to give traders hope for a new uptrend.
To Report Cointelegraph, Ethereum is still trading about 32% below the $2,000 price it last reached on August 14. Also, the average transaction fee of this network after the update of Meraj stands close to 2 dollars.
Meraj, the most important update of the Ethereum blockchain, took place on September 15 (24 Shahrivar). In this update, the energy-intensive mining technology was changed to a set of validators that require a stake of 32 Ethereum in the network.
Although it is necessary to implement sharding technology or parallel processing in the future, Meraj was not designed to solve the scalability problem at the current stage. As a result, according to DeepRadar data, Ethereum does not host any of the top 5 decentralized applications for users.
For this reason, it is valuable to analyze and review the data of the derivatives market to understand how confident the investment is in maintaining the upward trend of the Ethereum price and moving towards the $1,500 range or higher.
Investors’ sentiments are neutral to negative after the merger
Small traders usually avoid trading three-month futures because of the price difference with the spot market. However, three-month futures contracts are a preferred tool for professional traders because they can avoid constant volatility in contract funding rates.
In markets with neutral to bullish sentiment, these three-month fixed contracts typically trade at a small price difference to spot prices; Because investors demand more money to avoid settling their contract. Of course, this situation is not unique to digital currencies, and futures contracts are traded in healthy markets with warrants or annual premiums of 4-8%.
The negative premium of Ethereum futures contracts since the merger on September 15 indicates excessive demand to open short positions in anticipation of a decline in price. A worrisome situation known as Backwardation – an increase in the price of a futures contract as it nears its maturity.
Traders should also check Ethereum option contracts to eliminate side effects affecting futures trading. A 25% delta deviation indicates when market makers and arbitrage traders are paying extra to maintain an uptrend or downtrend.
In bull markets, option investors use a higher trading coefficient to increase the price: this causes the deviation of the delta index to decrease to minus 12%. On the other hand, widespread market panic will also cause a positive deviation of 12% or more.
The 12% deviation of the delta index in the last 30 days ending on October 3 (October 11) shows the reluctance of traders to carry out option transactions on the decrease in the price of Ethereum. However, these sentiments quickly changed to neutral from October 4 (12 Mehr); Because market makers and arbitrage traders have since started using similar coefficients in Ethereum long and short trading positions.
Low expectation of Ethereum price increase to $1,500 range
A look at derivatives market indicators shows that professional traders are not confident that Ethereum will be able to break through the $1,500 resistance any time soon. The low price of futures contracts compared to spot market prices also indicates the lack of interest in using leverage among buyers.
Additionally, Ethereum options traders continue to price the same as the market’s buyers and sellers, meaning that the 7.5% price growth hasn’t convinced them to start an uptrend. At present, the volume of Ethereum open contracts has reached $7.7 billion, which, considering the increase in short trading positions, could potentially cause a massive short selling pressure.
While using trading leverage is a great way to increase capital volume and profits, an unexpected volatility in the Ethereum price can lead to forced liquidation of trades and further amplify the price movement.
Ethereum bulls are having trouble taking over the market due to macroeconomic and regulatory issues dictating the current trend. That being said, a 10% move to $1,500 would be surprising and would liquidate short positions.