Since hitting an all-time high of $ 4,870 on November 10, Ether (ETH) the price has been recording lower lows for the past 50 days. If this downtrend continues, the lower trend line support suggests that the altcoin will bottom out at $ 3,600. Still, derivatives data indicates that professional traders are not concerned with the seemingly bearish market structure.
Notice how price spikes are subsiding over the 12-hour time frame as mounting regulatory concerns drive investors away from the sector. At a press conference on December 17, Russia Central bank governor, Elvira Nabiullina, stated that banning cryptocurrencies in the country is "quite feasible."
Nabiullina cited the frequent use of cryptocurrencies for illegal operations and significant risks to retail investors. Russian President Vladimir Putin also recently criticized cryptocurrency saying they are not backed by anything. Interestingly, the country plans to launch its own central bank digital currency even as the Russian ruble lost 44% against gold in the past four years.
In the United States, a bipartisan group of U.S. senators has asked Treasury Secretary Janet Yellen to clarify the language in the infrastructure bill related to the crypto tax filing requirements. Under the current broader definition of "middle man," miners, software developers, transaction validators, and node operators will likely need to report digital asset transactions worth more than $ 10,000 to the Internal Revenue Service.
Even with regulatory uncertainty and negatively skewed price action, traders should monitor the premium on futures contracts, also known as the "base rate," to analyze how bullish or bearish professional traders are.
Professional traders are neutral despite price weakness
The baseline indicator measures the difference between longer-term futures contracts and current spot market levels. An annualized premium of 5% to 15% is expected in healthy markets. This price difference is due to sellers demanding more money to hold the sale for longer.
However, a red alert appears each time this indicator fades or turns negative, also known as a "rollback."
Notice how the sharp decline after the 24% intraday crash on December 3 caused the annualized futures premium to hit its lowest level in two months. After the initial panic, the Ether futures market rallied to the current level of 9%, which is near the middle of the "neutral" range.
To confirm whether this move was specific to that instrument, traders should also look at the options markets. The 25% delta bias compares similar call (buy) and put (sell) options. The indicator will turn positive when "fear" prevails because the premium for hedging put options is higher than similar risk calls.
When market makers are bullish, the 25% delta bias indicator shifts into the negative area, and readings between negative 8% and positive 8% are generally considered neutral.
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Over the past three weeks, the 25% delta deviation ranged from a positive 3 to a positive 8 which is in the neutral zone. Consequently, the options market data validates the sentiment seen in the futures markets and indicates that whales and market makers are not concerned about recent price weakness.
If investors "back off" a bit, they will see that Ether's earnings to date are at 300%, and this explains why professional traders are not concerned about a 20% drop from the all-time high of $ 4,870.
Furthermore, the total value of the Ethereum network locked in smart contracts doubled in the last six months to $ 148 billion. This data gives derivatives traders the confidence to stay calm even with current short-term price weakness.
The views and opinions expressed here are solely those of the Author and do not necessarily reflect the views of Cointelegraph. Every investment and commercial movement involves a risk. You should do your own research when making a decision.
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