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

Sebastian Parker
Sebastian Parker
Last Updated on June 9, 2022

Ethereum ( ETH) has fallen 25% in a single month. Even the most recent upgrade to a Proof-of-Stake (PoS ) consensus on the Ropsten Testnet did not move the altcoin’s prices.

Although the merger is intended to solve energy-use problems and open a path towards higher transaction output, the actual transition for Ethereum is not expected until later this year. Parithosh Jayanthi, an Ethereum developer, also pointed out that there were some issues with the PoS implementation. These should be addressed in the coming weeks.

Two of Ethereum’s top competitors faced difficulties recently. After no new blocks had been produced for four hours in June, the Solana ( SOOL) network experienced its fifth outage in 2022. Each decentralized application was stopped until validators could address the issue and re-sync network.

Binance’s native BNB token fell 7% after the US Securities and Exchange Commission announced it had opened an inquiry into the initial coin offering (ICO) starting in 2017. Bloomberg reports that at least one U.S. resident claimed they took part in the ICO. This could prove crucial for an SEC case.

Ether’s sharp correction could partly be due to regulatory uncertainty. Hong Kong’s Securities and Futures Commission issued a warning note on June 6 regarding the investment risk of nonfungible tokens. The regulator highlighted the opaque pricing of these sectors, as well as frauds and illiquid markets.

Option traders remain extremely risk-averse

Ether’s data on derivatives markets should be reviewed by traders to see how large-sized traders are placed. The 25% delta skew indicates that arbitrage desks and whales charge too much for downside or upside protection.

The skew indicator will rise above 10% if traders are worried about an Ether price crash. Generalized excitement, on the other hand, reflects a skew of minus 10%. This is why the metric is also known as the pro traders fear and greed metric.

Since May 22, the skew indicator has exceeded 10% and recently reached 20% on June 3. These levels indicate extreme fear among options traders and, despite the slight improvement, the current 17% Delta skew indicates that whales and arbitrage desks are unwilling to accept downside risk.

Some positives can be found in long-to-short data

The long-to-short net ratio of the top traders does not include externalities that could have only impacted the options market. Analyzing the positions of these top clients on spot, perpetual, and quarterly futures contracts will help you to understand if professional traders are bullish or bearish.

Sometimes there are methodological differences between exchanges. Therefore, viewers should pay attention to changes and not absolute numbers.

According to the indicator, even though Ether is struggling to maintain $1,800 as support, professional traders didn’t change their positions between June 5-9.

Binance saw a slight decrease in its long/short ratio. The indicator moved from 0.99 in four days to 0.96 now. These traders net increased their bearish bets slightly.

Huobi data showed a similar pattern. The indicator changed from 1.02 to 0.98 June 9, which was a slight change favoring shorts. OKX exchange saw the metric fluctuate dramatically over the course of the period, but it ended almost unchanged at 1.35.

Related: DeFi contagion? Analysis: De-pegging Ethereum with ‘Staked Ether,’ warns 50%

Mixed derivatives data provides hope for bulls

Overall, there has not been any significant change in the leverage positions of whales or market makers despite Ether’s failure on June 6 to break through $1,900 resistance

Options traders are concerned about a deeper Ether price correction, while futures market players don’t believe in increasing bearish bets.

This reading is most likely a “glass-half-full” scenario, as top traders’ reluctance to sell below $1,900 could create support levels.

These views and opinions are the author’s and do not necessarily reflect those of Cointelegraph. Risk is inherent in every investment or trading move. Before making any investment or trading move, you should do your research.