The past few weeks have been staggering for Ether (ETH) as the cryptocurrency soared more than 80% to an all-time high of $ 4,200. Even after a correction of 7%, the cumulative profit is over 300% in 2021, and Ether currently has a market capitalization of over $ 450 billion.
Given this overwhelming performance, neither the premium of futures contracts nor the options fear and greed indicator signal extreme optimism in the market.. This data should lead some analysts to wonder whether traders are losing confidence in the future price outlook for ether.
Quoting the reasons for the current uptrend would lead to a long list, including the introduction of CME futures, the sale of “digital bonds” by the European Investment Bank, the Berlin update, and the block elasticity of the EIP-1559 bullish expectations pointing to the Expectations of the next interest rate fire are forecast.
The fact that decentralized apps hit $ 90 billion in net worth while ether balances for exchanging cryptocurrencies fell to historic lows adds additional demand for ether and supports the current bullish narrative.
Professional traders also showed interest when open positions in Ether futures surged above $ 10 billion. At the same time, VanEck’s application to the SEC for an Exchange Traded Fund (ETF) from ETH further shows that the optimistic outlook for Ether remains strong.
The Ether Futures premium is below the current average
To confirm whether investor sentiment has weakened as Ether hit its all-time high, the monthly base premium of the contracts should be monitored. Unlike perpetual contracts, these fixed calendar appointments do not have a funding rate. Therefore, the price will be very different from the regular spot exchanges.
By measuring the price gap between futures and the regular spot market, a trader can measure optimism in the market. If buyers are overly optimistic, the three-month futures contract will trade at an annualized premium of 20% or more (base).
As shown above, the current annualized premium of 23% is below average and far from the April 13th high of 47%. About this time Ether had gained 52% in three weeks as it approached $ 2,400.
A base level of 23% flirts with extreme optimism, but given the recent rally, one would expect a much higher number. Therefore, it must also be assessed how options traders rate downside risk.
The main risk indicator of the options is neutral
To gauge a trader’s optimism after Ether hits the all-time high of $ 4,200, the 25% delta deviation should be noted. This indicator provides a reliable analysis of “fear and greed” by comparing similar call and put options side by side.
The metric becomes positive when the premium for neutral to bearish put options is higher than for similar risk call options. This situation is widely considered to be a “scary” scenario. On the other hand, a negative trend leads to higher protection costs and indicates an upward trend.
The graph above shows the indicator in a negative 10, which is viewed as the neutral to bullish zone. As it is moving towards a negative 20, it is commonly viewed as a “greed” pulse occurring on May 9th when Ether hits its all-time high.
Both derivative indicators are on the edge of a neutral to bullish zone, which is unusual after a stable and positive performance. Therefore, It can be concluded that there is literally no “overexcitation” on the part of professional traders.
Some might say it’s a “half full” view of leverage from potential buyers.
However, The same data can be interpreted as a lack of confidence from professional traders, fueling bears’ hopes for an eventual correction in the price of ether. Unfortunately, there is currently no way to know as it is unclear when the Ethereum fee issue will be resolved.
The views and opinions expressed here are solely those of author and do not necessarily reflect the views of Cointelegraph. Every investment and trade movement is associated with risks. You need to do your own research when making a decision.