Saturday, October 1

2 Key Ethereum Price Metrics Support Trader Confidence at $ 3,800 ETH


According to derivatives markets, Ether (ETH) traders are still confident that there is the possibility of further upside even though the 23% correction on September 7 affected prices.

Ethereum network congestion also peaked on September 7 when the average transaction fee reached $ 60, and has since remained above $ 17. As a result of the persistent challenges experienced by the network, Investors have shifted towards Ethereum’s competitors with bridging and layer two capabilities. For example, Polkadot’s DOT increased 29% over the past week and Algorand’s ALGO soared 67%.

Without a doubt, there is a quest for interoperability and layer two scaling solutions, aiming to rapidly meet the explosive demand for non-fungible tokens (NFTs) and decentralized finance applications (DeFi).

Whether the Ethereum network will maintain its absolute leadership position seems irrelevant at this point as the industry net worth locked (locked total adjusted value) in smart contracts has risen from $ 13.6 billion in December 2020 to its $ 82 billion. millions today.

Regulatory fear emanating from the United States is likely holding back investor optimism in cryptocurrencies. According to a document released by a House committee on Sept. 13, lawmakers aim to close a loophole that previously allowed investors to claim capital gains deductions. The Internal Revenue Service currently considers cryptocurrencies as property in “wash sales” and as a result they are exempt from the 30-day buyback rules.

Ether price in Bistamp in USD. Source: TradingView

The brief $ 4,000 test on Sept. 3 momentarily caused derivatives markets to kick in. The 45-day nonstop rally had pushed the price of Ether up from $ 1,735 on July 20, an increase of 130%. Meanwhile, the $ 3,200 support held firm and bulls sentiment increased despite the altcoin falling 16% in eight days.

ETH Futures Data Shows Bulls Still “Bullish”

Quarterly Ether Futures are the preferred instruments of the whales and the trading desks. Due to their settlement date and the difference in price from the spot markets, they can seem complicated to retail traders. However, its most notable advantage is the lack of a fluctuating financing rate.

These fixed month contracts are generally traded at a slight premium to the spot markets, indicating that sellers are asking for more money to hold the settlement longer. Consequently, futures should trade at an annualized premium of 5% to 15% in healthy markets. This situation is known as “contango” and it is not exclusive to the cryptocurrency markets.

ETH Futures Annualized 3-month premium. Source: Laevitas

As shown above, Ether futures contracts have had a decent premium of 8% since August 9. Aside from the brief rise above 15% on September 7, derivatives traders have remained cautiously upbeat.

To understand if this movement was unique to those instruments, one must also analyze the perpetual contract futures data. Although longs (buyers) and shorts (sellers) are combined at all times in any futures contract, their leverage varies.

Consequently, exchanges will charge a funding fee to the side that is using the most leverage to balance its risk, and this fee is paid to the opposite side.

ETH perpetual futures 8 hour funding rate. Source: Bybt

The data reveals that the modest excitement began to accumulate on September 2, lasting less than five days. The positive finance rate shows that longs (buyers) were the ones who paid the fees, but the move appears reactive to the price surge and faded when Ether crashed on September 7.

At the moment, there are no signs of weakness in the Ether derivatives markets, and this could be interpreted as a bullish indicator. Investors’ attention remains focused on developments in regulation and Ethereum 2.0, which everyone assumes should solve the scalability problem forever.

The views and opinions expressed here are solely those of the Author and do not necessarily reflect the views of Cointelegraph. Every investment and trade movement involves risk. You should do your own research when making a decision.