Ethereum derivatives show strength despite 10% drop in ETH price
Ether (ETH) fell 10% to $3,567 on March 15, marking the lowest point in more than a week. This decline triggered $126 million in forced liquidations in ETH futures. Investors are speculating that this is a departure from the recent bullish trend and the possibility of a revisit to the $4,090 level seen on March 12. The key to this question may lie in the demand for ether derivatives.
Traditional financial assets have also experienced selling pressure
Ether's decline on March 15 mirrored the declines seen in Bitcoin (BTC) and the broader cryptocurrency market, which did not perform particularly well compared to the broader sector. Similarly, the S&P 500 index fell 1.1%.
Some experts believe the profit-taking move is not limited to crypto markets as the US 2-year Treasury yield hit 4.73 percent on March 15, the highest in more than three months. A rise in yields on fixed income represents selling pressure as investors seek higher returns on these assets. So, whether cryptocurrencies are seen as risky investments or not an option, traders are moving to cash for safety.
The US Federal Reserve (Fed) is set to decide on interest rates at its next meeting on March 20, with investors worried that recent lower-than-expected consumer inflation (CPI) and the producer price index may force it to do so. It is set to keep interest rates at 5.25% higher than originally thought. This prospect puts less pressure on the economy and favors fixed income investments.
Thierry Wiseman, global FX and price strategist at Macquarie, said: “The other issue here is not just 2024 and 2025, but other issues the Fed is thinking about, including that the market is very pessimistic.” According to CNBC, Wiseman suggested that this could signal the Fed's belief that long-term interest rates are needed.
Despite the current volatility and uncertainty in the global economy, the fact that Ether has increased by 57% year-on-year in 2024 should be seen as a strong vote of confidence. However, given the typically short-term view of crypto investors, it is critical to examine the ETH futures and options markets to determine if momentum has slowed following the recent 10% price drop.
Ether extracts show no signs of stress or trend change.
Fixed contracts, often referred to as inversions, have an embedded amount that is calculated every eight hours. A positive funding rate indicates strong demand from traders holding long positions.
The data shows that ETH's funding has been consistently above 0.03% in the eight-hour period, which translates to 0.6% on a weekly basis. Typically, when traders are overly optimistic about a bull market, these volumes can increase by more than 2.1% per week. Therefore, it is clear that traders engaged in perpetual futures did not switch to bearish positions during the March 15 correction.
It is important to analyze the balance between calls (buying) and puts (selling) in order to assess whether traders have been caught off guard and are now holding long positions at a loss. An increase in demand for put options usually indicates that traders are preparing to neutralize bear price movements.
Over the past 10 days, demand for Ether call options has averaged 60% higher than defense. This ratio can be considered neutral, especially since crypto traders tend to lean towards bullish positions. Therefore, there is no indication that the Ether derivatives market was significantly affected when the price of ETH temporarily fell by 10% on March 15. Based on the current state of Ether futures and options, the bull market seems unshaken, with indicators pointing to continued health. .
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.
