Crypto markets rallied, but Ethereum struggles to keep up with Bitcoin.
On May 15, cryptocurrency markets showed a 5.5% increase in total capitalization after the release of inflation and retail sales data from the United States. However, Ether (ETH) has not been able to take full advantage of this bullish movement. Ether last closed above $3,000 five days ago and has underperformed Bitcoin (BTC), the leader since early 2024, by 22%.
US macroeconomic data supports the rally with some rare assets
Crypto markets responded positively to US Consumer Price Index (CPI) data showing a 3.4% year-on-year increase in April, which was in line with market expectations. However, April retail sales data released on May 15 did not reassure investors as they showed a steady increase from the previous month, contrary to economists' forecast of a 0.4% increase. This development has increased the possibility of the US Federal Reserve (Fed) implementing measures to stimulate the economy.
Even if the US Fed decides to keep interest rates above 5.25% to control inflation, the central bank can take steps to increase the money supply and reduce the discount rate at which banks can borrow from the central bank, such as buying government securities. Bank. In essence, even a hint of continued liquidity can shape economic expectations and behavior.
Contrary to expectations, weak economic activity is often seen as an indication of more money flowing into the system, which benefits investments in scarce assets such as stocks, gold and cryptocurrencies. Eventually, the government will need to issue more debt to finance expansionary measures aimed at preventing recession. Over time, regardless of the interest rate, more money can increase as inflation increases.
Some analysts believe that the upcoming May 23 decision by the US Securities and Exchange Commission (SEC) regarding the VanEck Spot Ethereum EF application is a key reason for Ethereum's failure to break through the $3,000 resistance level. The uncertainty surrounding this event causes traders to postpone their investment decisions until the outcome is more certain, which is reasonable. No matter how optimistic he is about Ethereum's long-term prospects, a rejection from the SEC could result in a short-term market correction.
Eric Balchunas, senior ETF analyst at Bloomberg, expressed skepticism about approving the Ethereum ETF's position in 2024, given the regulator's wariness of products that could be classified as securities, particularly those that include native staking services. This uncertainty is also seen in the ether derivatives markets.
Ether derivatives markets reflect a lack of optimism
It is important to research the ETH futures and options markets to understand how professional traders are positioned. In neutral market conditions, Ether futures contracts trade 5% to 10% above the normal ETH price to get the extended settlement period.
Currently, the Ether futures premium (base rate) is at 9%, a figure that has remained stable for the past two weeks. This level indicates a general lack of enthusiasm regarding the ETF decision on the spot, citing a neutral sentiment among traders.
In the options market, there is an equal balance of demand for call (buy) and put (sell) options, as both types of instruments trade at the same price level. Typically, if traders expect a drop in Ether price, a 25% delta skew parameter will be greater than 7%. On the contrary, periods of high market excitement usually result in a negative change of 7%.
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If bullish trading interest had increased in anticipation of the Ethereum ETF decision, whales and market makers could have pushed prices higher for contracts that offer price protection. This indicates that higher prices await them in the future and traders are willing to take advantage of their willingness to pay more for potential profits.
Although it's tempting to pinpoint the exact reasons behind Ethereum's inability to capitalize on the gains made by the cryptocurrency sector today, ETH investors don't seem particularly optimistic about the prospects for the spot's Ethereum ETF adoption. Additionally, other factors, such as ETH supply becoming inflationary for the first time in 18 months due to reduced transaction fees, are contributing to ETH's price below $3,000.
This article does not contain investment advice or recommendations. Every investment and business activity involves risk, and readers should do their own research when making a decision.
