Derivatives data shows Ethereum traders positioned to extend the ETH rally

Derivatives data shows Ethereum traders positioned to extend the ETH rally
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Ether (ETH) price rallied 32% leading up to August 23, and despite testing the $3,000 support multiple times, the level has held firmly. Meanwhile, Bitcoin (BTC) could not sustain the $50,000 mark, at least in the short-term. According to Cointelegraph, pro traders are not yet inclined to add bullish positions according to derivatives metrics.

Surprisingly, the opposite situation emerges when looking at the sentiment of Ether traders who currently show a reasonable degree of confidence in the current price level.

Regulatory pressure and spectacular NFT growth back traders confidence in Ether

On Monday, Dawn Stump, a commissioner at the Commodity Futures Trading Commission (CFTC), stated that:

“A trading platform that offers derivatives on digital assets to U.S. persons without registering, or in violation of CFTC trading rules, is subject to the CFTC’s enforcement authority.”


It is unclear why Bitcoin’s and Ether’s reaction to the news would be any different, but it is worth noting that commissioner Stump is only one of four to six CFTC members on panels that regulate commodities.

Meanwhile, payment processor giant Visa surprised the NFT market, announcing a $150,000 CryptoPunk acquisition. Cuy Sheffield, the head of crypto at the $500 billion market cap company said:

“With our CryptoPunk purchase, we’re jumping in feet first. This is just the beginning of our work in this space.”

For those unfamiliar, the Ethereum network is the absolute leader in the NFT segment, and a single marketplace called OpenSea has processed more than $1 billion worth of transactions in the past 30 days.

Ether (ETH) price in USD at Kraken. Source: TradingView

Pro traders are neutral-to-bullish according to futures markets

To understand how bullish or bearish professional traders are leaning, one should analyze the futures basis rate. The basis is also frequently referred to as the futures premium, and it measures the difference between longer-term futures contracts and the current spot market levels.

A 5% to 15% annualized premium is expected in healthy markets, in a situation known as contango. This price difference is caused by sellers demanding more money to withhold settlement longer.

However, this indicator fades or turns negative during bearish markets and flashed a red flag known as ‘backwardation’.

Bitcoin 3-month futures annualized basis. Source:

As depicted above, the current 11% annualized premium is neutral but much better than one month ago when the metric held below 5%. Nevertheless, a healthy market does not need excessive optimism from pro traders, which usually ends with excessive leverage longs and a basis rate above 15%.

Options traders have been flirting with ‘greed’

To exclude externalities specific to the futures instrument, one should also analyze options markets.

The 25% delta skew compares similar call (buy) and put (sell) options. The metric will turn positive when fear is prevalent as the protective put options premium is higher than similar risk call options.

The opposite holds when market makers are bullish, causing the 25% delta skew indicator to shift to the negative area. Readings between negative 8% and positive 8% are usually deemed neutral.

Deribit ETH options 25% delta skew. Source: Laevitas

Notice how Ether option traders have been flirting with the ‘greed’ level since Aug. 7 when the indicator dropped below the negative 8 threshold. This data validates the futures contract premium, which has improved over the past couple of weeks and is currently sustaining a healthy ‘neutral’ level.

Derivatives data shows the pro traders that are more active on quarterly futures and Ether options trading sitting comfortably at the time of writing.

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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