Originally published on: December 09, 2024
The recent decline in Ether (ETH) prices has left traders questioning the strength of the ongoing bull run. On December 9, ETH dropped to $3,800 after struggling to break above $4,050, a resistance level that has been holding strong since December 2021. With Bitcoin (BTC) hovering around $100,000, concerns about the sustainability of the crypto market rally are rising.
One factor contributing to investor unease is the significant inflows into Ether exchange-traded funds (ETFs), which have not yet led to a breakthrough of the long-standing resistance level. Despite this, data from Ether futures indicates that professional traders are not overly concerned, showing no signs of expecting further price corrections.
Looking at the annualized premium for Ether futures, it currently sits at 17%, signaling a high demand for ETH leverage. This increased interest may be driven by arbitrage opportunities in perpetual contracts, also known as inverse swaps. Retail traders tend to avoid monthly futures due to their detachment from spot ETH markets, leading to a focus on perpetual contracts.
The funding rate for Ether perpetual futures is currently reflecting a 2.7% monthly premium, with a peak at 5.4% on December 5. This uptick in funding rates suggests a growing appetite for leveraged positions in monthly ETH contracts. Additionally, factors like a surge in onchain activity on the Ethereum network and record high inflows into spot Ether ETFs are fueling demand for bullish ETH positions in derivatives.
Despite the recent price correction in Ether and struggles to surpass key resistance levels, the options market remains relatively resilient. The options skew has shifted towards neutrality but has not shown a significant move towards bearish sentiment. This suggests that professional ETH investors are not anticipating major price corrections in the near future.
While the decline in Ether prices may be influenced by macroeconomic factors, including concerns about global economies, the crypto market sentiment remains cautiously optimistic. Traders are closely monitoring market indicators to gauge the next potential moves in the cryptocurrency space.
As Ethereum continues to navigate fluctuations and challenges, keeping a close eye on market trends and indicators will be crucial for traders and investors looking to capitalize on opportunities in the evolving crypto landscape. Stay informed and stay ahead in the dynamic world of digital assets.