Ethereum has strong fundamentals, so why are pro traders pessimistic about ETH?


Ether (ETH) has outperformed Bitcoin (BTC) by 32% since May and although there has been a steady stream of bullish reports from JPMorgan and Goldman Sachs, the derivatives metrics on both assets show bearish elements.

Ether and Bitcoin price change since May. Source: TradingView

Bitcoin is trading 41% below its all-time high of $ 64,900, and that move has driven the Crypto Fear and Greed Index to its lowest level since March 2020. While retail fears the slump, professionals like global investment firm Guggenheim Investments have been working with the United States Securities and Exchange Commission for a new fund that may seek exposure to Bitcoin.

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Billionaire investor Stanley Druckermiller reiterated his optimistic stance on Bitcoin when he said:

“I think BTC won the store game because it’s a brand, has been around for 13-14 years, and has limited supply.”

The dynamism of the Ethereum network has been excellent

Ethereum overtook Bitcoin in terms of miners’ earnings and network value, which got properly transacted when a report from Goldman Sachs revealed that the global investment bank believes Ether has a “high chance of overtaking Bitcoin as the dominant store of value” . The report noted the growth of the decentralized financial sector and the non-fungible token ecosystems built on top of Ethereum.

Income from Bitcoin and Ethereum network miners, USD. Source: CoinMetrics

Notice how Ethereum miners’ earnings significantly surpassed Bitcoin’s earnings in May, hitting a daily average of $ 76 million. That figure surpassed Bitcoin’s $ 45 million miners’ earnings, including the 6.25 per block subsidy plus transaction fees.

A similar situation occurred with the amount made and transferred on each network. For the first time, Ethereum presented a significant advantage according to this metric.

Average daily transactions on the Bitcoin and Ethereum network, USD. Source: CoinMetrics

The graph above shows that the Ethereum network handles an average of $ 25 billion per day, which is 85% higher than Bitcoin’s. Stablecoins certainly played an important role, but so did the $ 50 billion net worth locked into decentralized financial applications.

The futures premium has declined slightly

When measuring the futures contract premium, both Bitcoin and Ether show a similar level of bearish. The base rate measures the difference between longer-term futures contracts and the current spot market level.

The one-month futures contract is usually traded at a 10-20% premium over regular spot exchanges in order to justify blocking the funds instead of making an immediate payout.

OKEx Bitcoin and Ether Futures annualized premium (basis). Source: Skew

As shown above, the futures premium has been below 10% for both Bitcoin and Ether since the May 19 crash. This suggests a slight downward movement, but is far from a negative indicator known as backwardation.

Ether’s 25% delta skew signals “fear”

To assess the ether trader’s optimism, one should look at the 25% delta skew. The ratio becomes positive if the premium for neutral to bearish put options is higher than that of call options with a similar risk. This situation is usually thought of as a “fear” scenario. On the other hand, a negative bias leads to higher costs for hedging upwards and indicates an upward trend.

Ether options 25% delta skew. Source:

Similar to the futures premium, the 25% delta skew of ether options has been over 10% since May 19. This suggests that market makers and whales are unwilling to offer downside protection, which suggests “fear”.

Although removed from an extremely unfavorable situation, both indicators for ether derivatives point to a complete lack of uptrends, despite the fact that altcoin is up 270% since the start of the year.

Given these disappointing data, some analysts will find the “glass half full” as it leaves room for a positive surprise. The Ethereum Improvement Proposal 1559 or EIP-1559 expected for July will create a basic network fee that would fluctuate depending on network demand. The update also suggests burning transaction fees, introducing deflation into the Ethereum ecosystem. OKEx analyst Rick Delaney stated that it “could make the asset more attractive to the world’s richest investors.”

The views and opinions expressed here are solely those of author and do not necessarily reflect the views of Cointelegraph. Every investment and trading movement involves risks. You should do your own research when making a decision.