Ether price holds $1,820, but pro traders are skeptical about further gains

Ether price has remained above $1,820 for the past three weeks, despite facing a 13.7% correction between April 18-21. Still, looking at a broader time frame provides more constructive insight, as Ether (ETH) has gained 20.8% in three months, while the S&P 500 stock index has been flat. However, according to ETH options and futures metrics, the gains have not been enough to make professional investors bullish.

Worsening macroeconomic conditions have fueled the positive momentum for cryptocurrencies in 2023, including the ongoing banking crisis. According to Arthur Hayes, former CEO of crypto derivatives exchange BitMEX, if the government refuses to bail out First Republic Bankcould set off a dangerous chain reaction of insolvencies.

Recession risks increased after the US economy grew at a modest 1.1% annualized pace in the first quarter, well below the 2% expected. Meanwhile, inflation continues to weigh on the economy, as the personal consumption expenditures price index rose 4.2% in the first quarter.

Driving the downtrend of whales and market makers is the falling total value locked (TVL) and average transaction fees over $4 since February on the Ethereum network. According to DefiLlama data, Ethereum decentralized applications reached 15.3 million ETH on TVL on April 24. That compares to 22.0 million ETH six months earlier, a 30% decrease.

Ether's inability to break above $2,000 could also reflect that traders anticipate the Federal Reserve will raise interest rates again on May 3. Higher interest rates make fixed income investments more attractive, while businesses and households face additional costs to refinance their debts, creating a bearish environment for risky assets including ETH.

Ether futures show lack of buying appetite

Ether quarterly futures they are popular with whales and arbitrage tables. However, these fixed-month contracts are generally trading at a slight premium in the spot markets, indicating that sellers are asking for more money to delay settlement.

As a result, futures contracts in healthy markets should trade at a 5-10% annualized premium, a situation known as contango, which is not unique to crypto markets.

Ether traders have been cautious in recent weeks, and even with the recent break above $2,100 on April 14, there has been no increase in demand for leveraged longs.

Additionally, the Ether futures premium has worsened from its recent high of 4.7% on April 1 to its current level of 1.8%. This suggests that buyers are avoiding leveraged long positions and there is moderate demand for (bearish) short positions using futures contracts.

Ether options traders flirted with the downtrend

Traders should also analyze the options markets to understand if the recent correction has caused investors to become more bullish. The 25% delta bias is a telltale sign when arbitrage desks and market makers overcharge for upside or downside protection.

In short, if traders anticipate a drop in the price of Ether, the bias metric will rise above 7% and the hype phases tend to be negatively biased at 7%.

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Currently, the 25% delta bias for options is neutral between protective puts and neutral to bullish calls. However, between April 24 and 26, the indicator briefly held levels above 7%, as traders feared that a sharp price correction was the most likely scenario.

This change indicates a slight increase in confidence, but for the last four weeks, moderate fear has been the prevailing sentiment, based on 25% options bias.

In essence, the Ether futures and options markets suggest that professional traders are less confident than they were the week before, but they are not overly bearish. Consequently, if the ETH price breaks above $2,000, it would come as a surprise to most, but at the same time, the indicators show no signs of stress.

This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should do their own research when making a decision.