After a 42% rally over a three week period, Ether (ETH) peaked at $3,580 on April 3, and since then a 12% correction to $3,140 has taken place.
Tech giants launching their own smart contract platforms and regulatory uncertainty might have impacted investors’ sentiment and derivatives metrics also show worsening conditions which confirm professional traders’ shift toward bearish sentiment.
United States Senator Pat Toomey, the ranking member of the Senate Banking Committee, also drafted a bill proposing a regulatory framework for stablecoins. The legislation requires issuers to back up their stablecoin reserves with assets “that are cash and cash equivalents or level 1 high-quality liquid assets denominated in U.S. dollars.”
Despite Ether’s price correction to $3,200, the network’s value locked in smart contracts increased 13% in 30 days to $85.6 billion. Thus, it is worth exploring whether the mood of derivatives traders was impacted by the recent price rejection.
Derivatives show Ether traders flipping bearish
To understand whether the market has flipped bearish, traders must look at the Ether futures contracts premium, also known as “basis.” Unlike a perpetual contract, these fixed-calendar futures do not have a funding rate, so their price will differ vastly from regular spot exchanges.
A trader can gauge the market bullishness level by measuring the expense gap between futures and the regular spot market.
Related: The FDIC wants US banks to report on current and intended crypto-related activities
Options markets flirt with pessimism
To exclude externalities specific to the futures instrument, traders should also analyze the options markets. The 25% delta skew compares similar call (buy) and put (sell) options. The metric will turn positive when fear is prevalent because the protective put options premium is higher than similar risk call options.
The opposite holds when greed is prevalent, causing the 25% delta skew indicator to shift to the negative area.
While the current 7% reading is still neutral, it is safe to say that Ether pro traders became more uncomfortable as Ether traded down 12% in 4 days. Presently, there is a mild sense of bearishness in the market.
Of course, none of that can predict when Ether will continue to downtrend, but considering the current derivatives data, there’s less demand for leverage longs.
The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk. You should conduct your own research when making a decision.
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