Ether (ETH) price may have had a disappointing week after its price failed to hit the $ 600 level, but the fundamentals of the network and cryptocurrency remain solid. Traders are known for having brief reminders. It is therefore worth mentioning that the ether price is still 45% higher than in the previous month.
To understand whether the recent correction reflects a temporary consolidation or an effective cap caused by the lack of adoption, it is helpful to measure the metrics that reflect network usage on the Ethereum network.
A good place to start is analyzing transactions and the transfer of value.
The graph above shows how strong the growth in transactions and transfers was in late November as the price of ether tried to break its $ 600 peak. Although the indicator has not decreased significantly, it signals that the current price level of $ 550 is in line with blockchain activity.
Exchange withdrawals increased
Increasing withdrawals from exchanges can be caused by a number of reasons, including staking, crop farming, and buyers sending coins to a cold store. A steady inflow of net deposits indicates that there is short-term willingness to sell.
The sharp net outflow initiated in August lasted three months and resulted in 4.3 million ethers being pulled from the exchanges. Regardless of the reason for the redemptions, the move stopped in mid-November and this was an indication that investors were willing to reduce their positions in the short term as ETH topped $ 420.
On December 5th, when Ether showed signs of weakness, deposits on exchanges became rarer. For the past week, withdrawals outperformed deposits by 32,000 ethers. This metric confirms the thesis that traders are not ready to sell at the current price level.
The futures premium has normalized after reaching a high
Professional traders tend to dominate longer-term futures contracts with fixed expiration dates. By measuring how much more expensive futures are compared to the regular spot market, a trader can measure their upward trend.
The 3-month futures should normally trade at a premium of 1.5% or more compared to regular spot exchanges. Anytime that ad fades or goes negative, it’s an alarming red flag. Such a situation, also known as backwardation, suggests that the market is turning bearish.
The graph above shows that the indicator briefly touched 4.5% on December 1, but was later adjusted to 2.5% when ether stabilized near the $ 550 support. Regardless of the decline, it was above the minimum threshold of 1.5%, indicating optimism among professional traders.
This shows that despite the recent price weakness, professional traders remain confident that ether has optimistic potential.
The spot volume is recovering
Profitable traders not only monitor futures contracts but also keep track of the volume on the spot market. Breaking resistance levels at low volumes is kind of fascinating as low volumes usually indicate a lack of confidence. Therefore, significant price changes should be accompanied by robust trading volume.
While recent volumes have been below par, traders should keep in mind that Ether faced an uphill battle when it tested the $ 600 level. Therefore, some adjustment to a lower volume was expected until a final cycle low is reached.
Also, the current weekly average daily volume of $ 900 million mimics the mid-November numbers. Still, traders will only be confident that prices will recover and that the daily trading volume will surpass the $ 2 billion mark.
Put / call ratio of the options
By measuring whether there is more activity through call (buy) options or put (sell) options, general market sentiment can be measured. Generally, call options are used for bullish strategies, while put options are used for bearish strategies.
A put-to-call ratio of 0.70 indicates that the open positions of put options are 30% behind the more bullish calls and are therefore bullish.
In contrast, an indicator of 1.20 favors put options by 20%, which can be considered bearish. It should be noted that the metric aggregates the entire ether options market including all calendar months.
Typically, when the price of Ether nears USD 600, investors look for downside protection, which increases the put-to-call ratio. Oddly enough, the indicator has continued to grow in the past few days, approaching its 30-day high at 0.95.
Given that the current Ether price is up 45% from the previous month and investors have bought more neutral to more bearish option strategies, the current scenario in Ether is not really worrisome.
Investors aren’t overly excited, but neither are they bearish
Overall, each of the five indicators discussed above has stabilized in a neutral to bullish range, especially given the recently tested market below $ 540.
With Etherp price struggling to recapture $ 580, investors may begin to reconsider the chances of a short-term bull run.
At the moment there is no display to ring the alarm bell. The recent negative price volatility should therefore not be viewed as a trend reversal.
The views and opinions expressed here are solely those of author and do not necessarily reflect the views of Cointelegraph. Every investment and trading step is associated with risks. You should do your own research when making a decision.