Ethereum breaks through the US$3k barrier and is seeking higher goals in the upbeat market sentiment
The ether price, which is now hovering around US$2946. The recent spot Bitcoin’s US$51,698 exchange-traded fund (ETF) debut in the United States has seen a significant influx of investors, which is credited with driving the positive trends in cryptocurrencies. Nevertheless, Ether possesses other factors that can push its cost over US$3,000, a mark that was damaged during the last test in March 2022. What will happen this time around when Ether eventually rallies to the US$3,000 mark?
Looking ahead, Ether may solidify its position as the second cryptocurrency with its spot ETF listed on American exchanges, giving it a positive advantage. In terms of access and regulation, this would set it apart from rivals like Solana US$106 and BNB Chain US$354. The United States Securities and Exchange Commission (SEC) continues to sue exchanges, including Binance and Coinbase, over securities offers. Consequently, investors would have far less confusion if Ethereum ETFs were approved in the United States.
The anticipated March 13 Dencun network upgrade is another factor supporting Ether. Among other things, the hard fork seeks to lower Ethereum layer 2 transaction fees. These modifications have the potential to expand the adoption of its decentralized apps (DApps) and increase deposits in its smart contracts by providing more block space and lowering gas prices for rollups. Consequently, there will be a greater need for ETH.
Although there are many grounds for ether bulls to think US$3,000 is easily achievable, history demonstrates that maintaining such a price level is far more difficult. For example, three weeks before April 3, 2022, ETH increased by 42%, from US$2,520 to US$3,580. Its price crashed by 46% during the next 40 days, indicating that the surge was unsustainable. As of right now, traders wonder if Ether will experience a similar fate.
Ether’s futures premium, which shows the leverage demand between longs (purchasers) and shorts (sellers), should be examined first. Because monthly futures contracts don’t have a changing funding rate, professional traders prefer them. However, because of their longer settlement time, these products often trade at a premium of 5% to 10%.
According to data, on February 10th, the ETH futures premium broke above the 10% neutral level and is presently hovering at 15%. This figure suggests that bulls need more leverage as ETH rose from US$2,300 to the current US$2,800 level, even if it was not considered excessive. On the other hand, the neutral annualized premium (basis rate) in early April 2022 was 5.5%.
To get a clearer idea of how professional traders are positioned, one should use the 25% delta skew as a proxy and examine the options markets. The skew indicator will grow beyond 7% if traders anticipate a decline in Ether’s price, whereas a -7% skew is usually seen during exciting times.
On February 9, the delta skew indicator crossed the -7% barrier for positive markets and is already approaching its lowest point in three months. These results are consistent with data from ETH futures and depict a reasonable level of optimism that is neither too bullish nor very pessimistic.
Especially if they employ leverage, traders who are on a price gain based on the likelihood that the Ethereum spot ETF will be approved may be disappointed. Even though prominent Bloomberg ETF experts have given ETH a 70% chance of approval, the SEC has until May 23 to act, thus market volatility poses a danger of liquidation even if ETH surges beyond US$3,000 before the event. However, as of April 2022, Ether derivative measures paint a completely different picture, therefore there is still hope for ETH bulls.
