2 Key Ethereum Price Metrics Boost Traders Confidence In $ 3,800 ETH

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According to the derivatives markets, Ether (ETH) traders are still convinced that there is a possibility of an upside, even though the 23% correction on September 7 had an impact on prices.

Ethereum network congestion also peaked on September 7 when average transaction fees hit $ 60, and since then have remained above $ 17. Due to the persistent challenges faced by the network, investors turned to Ethereum’s competitors with bridge and layer two capabilities. For example, Polkadot’s DOT has increased 29% over the past week and Algorand’s ALGO has climbed 67%.

Undoubtedly, there is a quest for interoperability and Layer Two scaling solutions, aimed at quickly meeting the explosive demand for non-fungible tokens (NFTs) and decentralized finance (DeFi) applications.

Whether the Ethereum network maintains its absolute leadership position does not seem relevant at this time, as the locked-in industry net worth (locked-in adjusted total value) in smart contracts has grown from $ 13.6 billion in December 2020 to its current $ 82 billion.

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Regulatory fear coming from the United States is likely dampening the optimism of cryptocurrency investors. According to a document released by a House committee on September 13, lawmakers are aiming to close a loophole that previously allowed investors to claim capital gains deductions. The Internal Revenue Service currently considers cryptocurrencies to be property in “wash sales” and, therefore, they are exempt from the 30-day redemption rules.

Ether price on Bistamp in USD. Source: TradingView

The brief test of $ 4,000 on September 3 momentarily pushed the derivatives markets into overdrive. The 45-day non-stop rally had raised the price of ether by $ 1,735 on July 20, an increase of 130%. Meanwhile, the $ 3,200 support held firm and bolstered bull confidence even as altcoin fell 16% in eight days.

ETH Futures Data Shows Bulls Still ‘Bullish’

Quarterly Ether Futures are the preferred instruments of whales and arbitrage bureaus. Due to their settlement date and the difference in price compared to spot markets, they may seem complicated to retail traders. However, their most notable advantage is the absence of a fluctuating funding rate.

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These fixed month contracts typically trade at a slight premium to the spot markets, indicating that sellers are asking for more money to hold settlement longer. Therefore, futures contracts should trade at an annualized premium of 5-15% in healthy markets. This situation is known as “contango” and is not exclusive to crypto markets.

ETH Futures 3-month annualized premium. Source: Laevitas

As noted above, Ether futures have held a decent 8% premium since August 9. Aside from the brief increase above 15% on September 7, derivatives traders remained cautiously bullish.

To understand if this movement was exclusive to these instruments, one must also analyze the data on perpetual futures. Even though long (long) and short (short) positions match at all times in any futures contract, their leverage varies.

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Therefore, the exchanges will charge a funding rate to the party that uses the most leverage to balance their risk, and these fees are paid to the opposing party.

8 hour finance rate on ETH perpetual futures contracts. Source: Bybt

Data shows modest excitement began to build on September 2, lasting less than five days. The positive finance rate shows that buyers (buyers) were paying the fees, but the movement seems responsive to the price increase, and it faded when Ether crashed on September 7th.

At this time, there are no signs of weakness in the Ether derivatives markets, which could be interpreted as a bullish indicator. Investor attention remains focused on regulatory and Ethereum 2.0 developments, which everyone believes should definitely address the scalability issue.

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of TBEN. Every investment and trade move involves risk. You should do your own research before making a decision.