The price of Ether (ETH) is 13% behind Bitcoin’s (BTC) price action in October, but is that relevant? To date, the altcoin has still outperformed BTC by 274% in 2021. However, traders tend to be short-sighted and some will wonder if the Ethereum network can successfully migrate to Proof of Stake (PoS) validation and finally solve the high gas fees issue.
In addition, increasing competition from smart contract networks such as Solana (SOL) and Avalanche (AVAX) is worrying investors:
A big problem with the “ETH is ultra-solid money” meme is that EIP-1559 only restricts the supply of ETH if Ethereum continues to have a lot of transactions. It’s also possible that people are fed up with the $ 80 gas fees and opt for one of the many alternatives (SOL, AVAX, etc.).
– dennis in SF // OP_CTV (@pourteaux) October 8, 2021
According to Cointelegraph, recent speculation about the possible approval of a Bitcoin Exchange Traded Fund (ETF) has piqued traders’ appetites for BTC. The U.S. The Securities and Exchange Commission (SEC) is expected to announce its decision on several ETF inquiries over the next few weeks. However, it remains possible that the regulatory authority will postpone these dates.
Professional traders are unimpressed by the recent price stagnation
To determine if professional traders are bearish, one should first analyze the futures premium – also known as the base rate. This indicator measures the price difference between the futures contract prices and the regular spot market.
Ether’s quarterly futures are the preferred instruments of whales and arbitrage desks. These derivatives may seem complicated to retail investors due to their settlement date and the difference in price to the spot markets, but their biggest advantage is the lack of a fluctuating financing rate.
The three-month futures typically trade at an annualized premium of 5% to 15% that follows the stablecoin loan rate. By postponing the billing, sellers charge a higher price, which creates the price difference.
As outlined above, Ether’s failure to break the $ 3,600 resistance didn’t cause a shift in pro-trader’s sentiment as the base rate remains at a healthy 13%. This shows that there is currently no excessive optimism.
Retailers have been neutral for the past five weeks
Retailers tend to opt for perpetual contracts (inverse swaps), which charge a fee every eight hours to offset the demand for leverage. In order to understand whether panic selling has occurred, one has to analyze the financing rate of the futures markets.
In neutral markets, the financing rate tends to fluctuate between 0% and 0.03% on the positive side. This fee is equal to 0.6% per week and indicates that Longs are paying it.
There has been no real sign of high demand for leverage from either bulls or bears since Sept. 7. This balanced situation reflects retailers’ lack of appetite for long leverage, but at the same time shows little panic selling or undue fear.
The derivatives markets show that ether investors are not concerned about the recent underperformance against Bitcoin. In addition, the lack of excessive long leverage should be portrayed positively after a year-to-date gain of 274%.
By leaving some room for uptrend without affecting the structure of the derivatives market, ether traders appear to be prepared for a rally above their all-time high, especially if a Bitcoin ETF is approved.
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.