Originally published on: December 09, 2024
Ether took a hit on December 9, slipping to the $3,800 level after failing to surpass $4,050—a resistance level that has held since December 2021. With a 5% decrease in price, concerns are arising about the sustainability of the bullish trend, particularly as Bitcoin hovers near $100,000.
Many investors are feeling uneasy, especially with record-high inflows into Ether exchange-traded funds (ETFs) failing to break through the multi-year resistance level. Despite this, Ether futures data indicates that professional traders are not showing signs of anticipating further corrections.
The annualized premium for Ether futures is currently at 17%, a figure that has remained unchanged from the previous week and well above the neutral benchmark of 10%. This heightened premium suggests a surge in demand for ETH leverage, potentially due to arbitrage opportunities in perpetual contracts.
Retail traders tend to shy away from monthly futures due to their price detachment from spot ETH markets. However, increased leverage demand is impacting monthly futures pricing as larger traders monitor arbitrage opportunities closely.
When analyzing the futures market, the funding rate for Ether perpetual contracts currently sits at a 2.7% monthly premium, slightly above the neutral threshold of 2.1%. This metric spiked at 5.4% on December 5, indicating a growing appetite for leveraged positions in monthly ETH contracts.
Factors such as a substantial $1.17 billion inflow into spot Ether ETFs since November 29 and a 24% surge in on-chain activity on the Ethereum network also contribute to the demand for bullish ETH positions in derivatives.
Additionally, Ethereum is closing the gap with Solana as the leader in decentralized application (DApp) volumes. Layer-2 scaling solutions like Base, Arbitrum, Polygon, and Optimism have helped boost Ethereum’s combined volume to $48.6 billion, surpassing Solana’s $29.5 billion.
To gauge whether professional ETH investors are expecting further price corrections, the ETH options skew must be examined. The Ether options market has shown reduced optimism, with a skew moving to -2% (neutral) from -7% on December 6.
Despite Ethereum’s recent price correction and struggles to breach $4,050, the options market remains resilient. A shift towards bearish sentiment could push the skew above the 6% neutral threshold.
It’s worth noting that Ethereum’s price decline seems more influenced by macroeconomic concerns than crypto-specific factors. The recent drop in Nvidia shares due to a monopoly investigation and China’s declining inflation data in November may have impacted investor confidence.
While fears of weakening global economies affecting cryptocurrency markets linger, traders’ sentiment remains relatively upbeat, as seen in derivatives market indicators.
