Ethereum Traders Target 3K, But Historical Data Raises Few Red Flags for ETH Price
The price of Ether (ETH) has been trending upward for the past 10 days, amassing a 21.5% gain during this period while flirting with the $2,800 level. The surge in cryptocurrencies is due to inflows into Bitcoin (BTC) exchange-traded funds (ETFs) in the United States, but Ether has additional drivers that could propel its price above $3,000 — a level scarred by the last time it was attempted in March 2022. . Will Ether's eventual rally to $3,000 be different this time?
From a leverage point of view, Ether could strengthen its position as the second cryptocurrency to have an ETF listed on US exchanges. This differentiates it from competitors like Solana (SOL) and BNB Chain (BNB) in terms of access and control. Exchanges including Binance and Coinbase are still facing lawsuits from the US Securities and Exchange Commission (SEC) regarding security provisions. Therefore, the approval of Ethereum ETF in the US will significantly reduce the uncertainty for the investors.
Other positive drivers for Ether include the Denkun Network upgrade expected on March 13. These changes could be the hard fork, among other things, to reduce transaction costs on Ethereum layer 2. By providing more block space and reducing gas costs for blockchain. It can increase the use of decentralized applications (DApps) and increase deposits in smart contracts. This translates into a higher demand for ETH.
Ether bulls have several reasons to believe that $3,000 is on the horizon, but history shows that sustaining such a price level is very difficult. For example, three weeks before April 3, 2022, ETH gained 42%, rising from $2,520 to $3,580. However, the rally proved unsustainable as the price nosedived 46% over the next 40 days. Traders are now asking if Ether will experience the same result this time.
The first measure to be analyzed is the Ether futures premium, which reflects the demand for interest between longs (buyers) and shorts (sellers). Professional traders prefer monthly futures contracts due to the lack of variable amounts, but these instruments trade at a 5% to 10% premium to compensate for the extended settlement period.
Data shows that the ETH futures premium increased above the neutral threshold of 10% on February 10 and currently hovers around 15%. Although not excessive, this level indicates that bulls need more energy as ETH moves from $2,300 to the current $2,800 level. In contrast, the annual premium (base rate) at the beginning of April 2022 stands at 5.5%, which is considered neutral.
Using the 25% delta skew as a proxy, professional traders should analyze options markets to better gauge how they are positioned. If traders expect a drop in Ether's price, the skew gauge will rise above 7%, while bullish periods have a -7% skew.
Related: Uniswap v4 will launch in Q3 following Ethereum's Denkun update
The delta skew gauge entered the -7% level for bullish markets on February 9 and is currently at its lowest levels in three months. These findings are consistent with ETH futures data and paint a moderate bullish outlook, not overly so but unbalanced between bulls and bears.
Traders betting on price increases based on the approval of the Ethereum Spot ETF may face disappointment, especially if they use leverage. Although Bloomberg ETF analysts peg the odds at 70%, the SEC's deadline is May 23, meaning price volatility is high even if ETH explodes above $3,000 ahead of the event, indicating a high risk of spillover. Still, Ether derivative metrics point to a completely different scenario with April 2022, so nothing is in store for ETH bulls.
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.
