Is $4,000 Ethereum a distant dream? Futures premium drops to 3-week low.
Ether (ETH) has been trading below $3,750 for the past three days despite the recent launch of coin spot exchange-traded funds (ETFs) in the United States. Some have argued that the lack of bullish initiative for ETH is due to a lack of clarity on how long approval of an individual S-1 fund by the administrator might take. Regardless, bullishness among Ether investors based on derivatives metrics has dropped to a 3-week low.
Regulatory uncertainty pressure on ETH price
However, even though the US Securities and Exchange Commission (SEC) this week approved every filing from BlackRock, Fidelity, VanEck and other firms, investors fear that current market conditions will not support demand for Ethereum ETFs. The lack of enthusiasm for cryptocurrencies comes in part from regulatory uncertainty, but there is also some concern on the macroeconomic side as the real estate market shows further signs of stress.
Coinbase, Binance and Kraken are facing court action for failing to register as brokers when offering securities investments. The US SEC and the US Department of Justice have filed lawsuits against crypto companies that include privacy tools such as Zamora Wallet and Tornado Raw. In addition, regulators may consider the middle of ether staking services to be collateral, as there is a promise to replace the work of others.
Even if one assumes that there is no imminent incident on the crypto regulatory front, investors are not comfortable holding assets that are considered risky in the event of an economic downturn. Moody's Ratings said on June 6 that banks in at least six US states are at risk of downgrading their debt because of “significant accumulations in commercial real estate” that are suffering from high interest rates.
The New York Times ran a story on May 24 about China's housing market, with nearly four million apartments sitting empty for unwilling buyers. The article highlights that government incentives to buy those properties using government-backed loans have not kept house prices from crashing, and developers are “still at risk” because they are “too tied to local banks and the financial system.”
Less than favorable macroeconomic conditions explain why Bitcoin (BTC) was unable to break above $71,000 on June 7, which reduced Ether investors' expectations of where Ethereum ETF flows could enter. The worst sentiment is evident in ETH futures and options benchmarks, which have moved to their most pessimistic points in more than three weeks.
Confidence in ether derivatives markets has decreased
Professional traders prefer monthly contracts due to the lack of funds. In independent markets, these devices are sold for 5 to 10% of the price, taking into account their extended settlement period.
The data shows that the ETH futures premium fell to 13% on June 10, down from 15% on June 6. While far from a bearish structure, this is the lowest level in more than three weeks. This is certainly not what one would expect, as some analysts claim that Ethereum ETFs can capture up to 20% of Bitcoin's earnings in the same instruments.
Related: Ethereum Leaders Stuck in ‘Big Contradiction' – Wintermute CEO
Traders should also analyze the options markets to gauge whether investors are becoming less optimistic. If investors expect a drop in Ether's price, the 2-month delta skew measure will increase above 8%, and bullish periods will result in a negative 8% skew.
The 25% delta skew of ETH options finally peaked on May 29, but the last -6% level is fairly neutral and balanced, meaning that whales and market makers are currently making the same positive and negative price swings for Ether's price. .
Considering that Ether futures and options are showing less bullishness despite the fact that Ethereum ETF trading is likely to begin in the US, the chances are that the price of ETH is unlikely to rally above $4,000 in the near future.
This article is not intended for general information purposes and should not be construed as legal or investment advice. The views, ideas and opinions expressed herein are solely those of the author and do not necessarily represent the views and opinions of Cointelegraph.
