On February 20, the price of ether (ETH) rose to a high of $ 2,015, prompting a number of indicators to show signs of over-optimism. While the enthusiasm could easily be justified by Ether’s 176% annual profit to date, these warning signs should not be ignored.
One of the main factors of a bull’s current mood is the launch of CME ETH futures contracts and the Grayscale Investments ETH Trust, which reaches $ 6.3 billion in assets under management. The phenomenon of DeFi also continues, as there are currently more than $ 21 billion of ether locked in DeFi.
In fact, el índice Crypto fear and greed This is at 93, indicating “Extreme greed” according to their methodology. Many traders use metrics as a counterparty signal, which means that an extreme level of fear can be a sign that investors are optimistic and that there is a possibility of buying. Conversely, when investors are too greedy, this may be a sign that the market should make a correction.
Unlike retailers with too much leverage more spicy marketers and whales were skeptical of Ether’s endless rally. Whatever the reason for the price jump, the 36% price correction that followed was accelerated by big sales.
The $ 2 billion settlement in futures contracts Feb. 19-23 accounted for 28% of all open interest. Therefore, a significant deterioration in market sentiment is to be expected, as shown by the Fear and Greed indicator above.
Surprisingly, none of this happened in the ether derivatives markets, as both the premium on forward contracts (contango) and the slope of the delta of options remained bullish.
Futures premium has maintained a very healthy level
By assessing the difference in consumption between futures contracts and the normal spot market, traders can assess the level of optimism in the market.
Three-month futures contracts typically have to trade at a premium of 10% or more compared to regular spot exchanges. When this indicator fades or becomes negative, it is a signal to trigger alarms. This situation is known as setbacks and indicates that the market is changing bears.
The graph above shows that the indicator reached 39% on February 20, when Ether peaked. However, it remained above 16% at $ 1,300 during the correction. These data show that professional retailers were still confident in the price potential of Etra.
The potential bias remained neutral to bullish
In the analysis of options, a 25% slope is the most important indicator. This indicator compares similar options to buy (buy) and sell (sell) in parallel.
It will be negative when the premium for put options is higher than call options with similar risk. Negative bias means higher protection costs and indicates optimism.
The opposite happens when market makers are bears, which gives the 25% delta slope indicator a positive basis.
There has not been a single case of sustainable positive delta bias in the last month. Therefore, there is no evidence that options traders demand higher premiums to protect against falls.
This data is very encouraging, given that Ethereum faced a big sell-off, but the metrics of futures and options discussed above had a bullish level during the recession.
As Ether managed to pick up quickly from a recent drop to $ 1,300, investors gained more confidence that the trend hadn’t been broken.
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