Ethereum has recently made considerable gains in the market after a prolonged period of volatility. The second-largest cryptocurrency is up 35% in the last 10 days and is currently trading over its critical support of $2,300. Some analysts believe that ETH is positioned for a bullish run that could put the currency at nearly $3,000. However, derivatives data does not support this projection and shows a lack of confidence in the latest rally. This is certainly unusual in the light of the upcoming upgrades that are seen as a boost to Ethereum’s adoption and value. Derivatives Market Data Indicates Investors Aren’t Confident About Ethereum The derivatives market is one of the first places to look for bullish sentiment for an asset. For instance, to gauge the prevailing sentiment among professional traders, one could analyze the price difference between futures contracts and regular spot markets. Normally, three-month futures should be trading with an annualized premium of 6% to 14% during neutral to bullish markets. When settlements are postponed by sellers who demand higher prices, a premium is generated. If futures premium diminishes or becomes negative, it leads to a situation called backwardation, which is usually associated with a bearish sentiment. According to data from TradingView, ETH futures turned negative on July 20 when Ethereum hovered around the $1,750 support level. But even after the huge upswing to $2,450, the September contract premium struggled below 1.3%, which is equivalent to 8% in annualized premium. This figure could have been higher than 12% if pro traders were optimistic about the prices. Options Markets Also Reflect Neutral to Bearish Sentiment Another place to confirm an incoming bull rally is the options market. Generally, the biggest movers and shakers of an asset demand a bigger premium on buy (call) options when they are feeling bullish. This will cause the 25% delta skew indicator to become negative. Conversely, whenever the sell (put) options are priced higher, the 25% delta skew indicator becomes positive. On a typical one-month skew chart, trends between negative 10% and positive 10% are considered neutral. For Ether, the indicator reflected fear between May 20 and July 19 but later showed recovery after ETH managed to hold on to its $1,750 support. Currently, the 25% delta skew indicator is at negative 4, which is insufficient to predict a bull market in the future. Pricing in the options market also appears balanced between the buy and sell options. The assessment here is that pro traders are no longer fearful since July 20. But they are also not bullish as of yet. Derivatives data suggests traders are holding back before the upcoming London hard fork which will lower the transaction fees on the network and also reduce mining incentives. The uncertainties related to these changes could prevent Ether from reaching predicted highs.
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