Although the price of ETH may fall to new lows near $3,600, data from derivatives shows that professional traders remain bullish.
In the 50 days since hitting an all-time high of $4,870 on Nov. 10, the price of Ether (ETH) has posted lower lows than at any point in history. According to the current downtrend support line, the altcoin is likely to reach a low of $3,600 in the coming months if the current trendline support is not broken. Despite this, data from the derivatives market indicates that professional traders are not concerned about the market structure, which appears to be bearish.
Ether/USD price on FTX. Source: TradingView*
Take note of how the price peaks are getting lower on a 12-hour time frame as investors flee the sector in response to growing regulatory concerns. According to Elvira Nabiullina, the governor of Russia's Central Bank, banning cryptocurrency in the country is "quite doable," according to a press conference held on December 17.
Nabiullina cited cryptocurrency's widespread use in illegal operations as well as the significant risks it poses to retail investors. Cryptocurrencies, according to Russian President Vladimir Putin, are not backed by anything and are therefore untrustworthy. The country plans to launch its own central bank digital currency, which is notable given that the Russian ruble has lost 44% of its value against gold over the past four years.
When it comes to crypto tax reporting requirements in the United States, a bipartisan group of senators has called on Treasury Secretary Janet Yellen to clarify language in the infrastructure bill relating to those requirements. Miners, software developers, transaction verifiers and node operators may be required to report transactions worth more than $10,000 under the current "broker" definition.
Investors should keep an eye on the "basis rate" (also known as the futures contract premium) to see how bullish or bearish professional traders are despite the regulatory uncertainty and skewed price action.
Even though the price has fallen, professional traders remain neutral.
The basis indicator measures the difference between long-term futures contracts and current market levels. In healthy markets, a 5% to 15% annualized premium is expected. Sellers are asking for more money in order to delay payment, resulting in this price disparity.
However, if this indicator fades or turns negative, known as "backwardation," a red alert is issued.
Ether 3-month futures basis rate. Source: Laevitas.ch
The annualized futures premium fell to its lowest level in two months following a 24% intraday crash on December 3. Immediately following the initial panic, the Ether futures market rebounded to its current 9 percent level, which is close to the "neutral" range.
Traders should also look at the options markets to confirm if this movement is unique to that instrument. Call and put options of the same underlying asset are compared using a 25 percent delta skew to determine the most favorable trading strategy. Because put options premiums are higher than similar risk call options in times of "fear," the indicator will show a positive reading when "fear" is prevalent.
This indicator shifts from positive to negative when market makers are bullish, and readings between -8.8% to +8.8% are considered neutral.
Ether delta skew. Source: Laevitas.ch
The 25 percent delta skew has been between a positive 3 and an 8 for the past three weeks, which is neutral. This confirms that traders and market makers are unconcerned about recent price weakness, as evidenced by data from the options market.
It is easy to see why professional traders are unconcerned about Ether's 20% drop from its all-time high of $4,870 if investors "zoom-out." Ether's gains for the year to date are over 300%!
In addition, Ethereum's total smart contract value has grown to $148 billion in the last six months. Derivatives traders can remain calm despite the current short-term price weakness thanks to this data.
It should be noted that the author's views and opinions do not necessarily reflect those of Cointelegraph. Investing and trading are both high-risk endeavors. When making a decision, it is important to conduct your own investigation.
Difference between Ether and Ethereum:
Ether and Ethereum are two different types of digital currency.
Despite the fact that Ethereum is a blockchain-based platform, Ether is a cryptocurrency that was designed to be used for monetary transactions within Ethereum's network. When it comes to smart contacts and decentralized apps, Ethereum can be used as a platform, whereas Ether can be used to make payments within Ethereum's network and on other platforms that accept it. Several cryptocurrency exchanges, including Coinbase and Binance, allow you to buy, sell, or trade Ether.
In what ways might Ethereum and Ether be put to good use?
As a viable alternative to more traditional payment methods, blockchain-based cryptocurrencies have grown in popularity. They have a variety of advantages, and are widely regarded as a convenient way to send or receive money.
Compared to bank wires and even ACH payments, cryptocurrency payments can be sent and received from anywhere in the world. Ether-delivered funds may be received almost immediately. Since checks or electronic transfers can take up to 30 days to clear, this speed of cleared payment is critical. Since ether is the same in Canada as it is in Japan, transferring funds internationally does not necessitate any currency conversions.
Merchant remittance, sending money to a friend for dinner, and even buying coffee could all be possible uses of ether.
What's so Special About Ethereum and Ether for Investors?
Investing and trading in cryptocurrencies has grown in popularity in the last year due to the potential long-term gains. Miners can create only so many units or tokens of most cryptos. The laws of supply and demand dictate that prices will rise if demand rises while supply stays the same. These prices could soar far above their current levels, and no one can predict how high they might rise.
Ethereum Price Update
In the last 24 hours, the price of Ethereum return by 3.63 percent. Last traded at $3,229.42 per coin.