Between January 8 and January 10, the price of Ether fell by 10.2%. Since then, it has been fluctuating around the $1,500 mark. More significantly, over a longer period, Ether has fallen 52.5%, which helps to explain why derivatives metrics were largely neutral following Ether’s failed effort to surpass $1,700 on February 8.
The SEC’s litigation and enforcement efforts against cryptocurrency businesses, which included Kraken’s suspension of its as-a-service program and PayPal delaying its stablecoin project owing to regulatory concerns, are now investors’ top worries.
Decentralized finance (DeFi) is anticipated to suffer unforeseen effects from an SEC crackdown on crypto staking, according to Jacob Blish, the Lido DAO’s head of business development. Blish joined the rising chorus of voices in the cryptocurrency business pushing for openness in the regulation of the sector.
On the plus side, Ethereum developers said that the Shanghai update will be pre-launching on the Zhejiang testnet. The move is necessary to allow withdrawals from validators’ staking positions, according to a blog post published on February 10. The Zhejiang test network is the first of three testnets that imitate Shanghai. Although a precise date has not been announced, it is anticipated that Shanghai will go online in March 2023.
Due to the price disparity between quarterly futures and spot markets, retail traders typically steer clear of them. Because they stop financing rates in a perpetual futures contract from fluctuating, professional traders favor these products.
In healthy markets, the three-month futures annualized premium should fluctuate between 4% and 8% to cover expenses and related risks. However, it indicates a lack of trust among leverage purchasers when the futures trade at a discount to conventional spot markets, which is a negative indication.
Due to the Ether futures premium moving below the 4% level, the market charts show that traders in derivatives are increasingly negative. Bears can thus rejoice that the indicator was unable to show a little premium even when ETH tested $1,700 on February 8.
The absence of demand for leveraged long positions does not automatically imply that negative price action will occur. To understand how market makers and whales are estimating the likelihood of future price moves, traders should study Ether’s options markets.
When market makers and arbitrage desks overcharge for upside or downside protection, the 25% delta skew is a telltale indication.
Options traders increase their likelihood of a price drop during bad markets, pushing the skew indicator beyond 10%. The demand for bearish put options decreases in positive markets, where the skew indicator is often below -10%.
