Bullish sentiment is starting to fade after Ethereum’s all-time high at $ 4,200


The past few weeks have been nothing short of astonishing for Ether (ETH) as the cryptocurrency has risen by over 80% to an all-time high of $ 4,200. Even after a correction of 7%, the profits accumulated in 2021 will exceed 300%, and Ether currently has a market capitalization of more than $ 450 billion.

Given this overwhelming performance, neither the futures contract premium nor the option fear and greed indicator signals extreme optimism in the market. This data is likely to lead some analysts to wonder if traders are losing confidence in the future price outlook for Ether.

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Ether price at Coinbase, USD. Source: TradingView

Quoting the reasons for the current bull run would lead to a long list, including the introduction of CME futures, the sale of “Digital Bond” by the European Investment Bank, the Berlin upgrade and the block elasticity of EIP-1559, as well as the projected bullish expectations upcoming charges burning expectations.

The fact that decentralized applications hit a net worth of $ 90 billion while the ether balances of the crypto exchange fell to record lows adds to the demand for ether and supports the current bullish graph.

Professional traders also showed interest as open positions in ether futures surged above $ 10 billion. At the same time, VanEcks SEC filing for an exchange-traded ETH fund (ETF) shows that the optimistic outlook for Ether remains strong.

Ether’s futures premium is below the current average

To confirm whether investor confidence has fallen as Ether hit its all-time high, the monthly base premium, known as the base, should be monitored. Unlike perpetual contracts, these fixed calendar futures do not have a funding rate. Therefore, their price will be very different from the regular spot exchanges.

By measuring the price gap between futures and the regular spot market, a trader can measure the degree of upward movement in the market. Whenever buyers are overly optimistic, the three-month futures contract will trade at an annualized premium of 20% or more (base).

OKEx 3-month ether futures basis. Source: Skew

As shown above, the current 23% annualized premium is below average and far from the April 13 high of 47%. At that time, Ether had gained 52% in three weeks as it approached $ 2,400.

A base level of 23% flirts with extreme optimism, but given the recent rally, one would expect a much higher number. Therefore, how options traders rate downside risk should also be assessed.

The primary risk indicator for options is neutral

To gauge a trader’s optimism after Ether hits its all-time high of $ 4,200, one should look at the 25% delta offset. This indicator provides a reliable analysis of “fear and greed” by comparing similar call (buy) and put (sell) options side by side.

The metric becomes positive if the premium for neutral to bearish put options is higher than for call options with a similar risk. This situation is usually thought of as a “fear” scenario. On the other hand, a negative offset leads to a higher cost for the upward protection and indicates an upward movement.

30 day ether options 25% delta offset. Source: laevitas.ch

The graph above shows the indicator at minus 10, which is considered a neutral to bullish zone. As it moves towards the negative 20, it is usually viewed as a “greed” dynamic that occurred on May 9th when Ether was making its all-time high.

Both derivative indicators are on the edge of a neutral to bullish zone, which is unusual after a steady and positive performance. Hence, one can conclude that there is literally no “overexcitation” of pro-traders.

Some might say it’s a “half full” view of leverage from potential buyers.

However, the same data can be interpreted as a lack of confidence on the part of pro traders, fueling bears’ hopes for an eventual correction in the price of ether. Unfortunately, there is currently no way to tell as it remains unclear when the Ethereum fee issue can be resolved.

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.