3 Key Ethereum Derivatives Statistics Suggest $1,600 ETH Support Isn’t Strong


The price of Ether (ETH) has risen 60% since May 3, surpassing the leading cryptocurrency Bitcoin (BTC) by 32% during that period. However, there is some evidence that the current $1,600 support isn’t strong enough as network usage and smart contract deposit statistics have weakened. In addition, ETH derivatives are showing increasing selling pressure from margin traders.

The positive price movement was mainly driven by increasing certainty of the transition from “Ethereum merger” to a proof-of-stake (PoS) consensus network in September. During the Ethereum core developers conference call on July 14, developer Tim Beiko suggested September 19 as the tentative target date. In addition, analysts expect the new supply of ETH to decline to 90% after the network’s monetary policy change, which is a bullish catalyst.

The Total Value Locked (TVL) of Ethereum has benefited immensely from the collapse of Terra’s ecosystem in mid-May. Investors moved their decentralized financial (DeFi) deposits to the Ethereum network thanks to its robust security and proven applications, including MakerDAO (MKR) – the project behind the DAI stablecoin.

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Total value locked by market share. Source: Defi Llama

Currently, the Ethereum network has a 59% market share of TVL, up from 51% as of May 3, according to data from Defi Llama. Despite gaining market share, Ethereum’s current $40 billion deposits on smart contracts seem small compared to the $100 billion seen in December 2021.

Demand to use decentralized applications (DApp) on Ethereum appears to have decreased, given the median transfer cost or gas cost, which is currently $0.90. That’s a sharp drop since May 3, when network transaction costs averaged over $7.50. Still, you could argue that higher use of low-2 solutions such as Polygon and Arbitrum are responsible for the lower gas rates.

Options traders are neutral and exit the ‘fear’ zone

To understand how whales and market makers are positioned, traders should look at Ether’s derivatives market data. In that sense, the 25% delta skew is a telling sign when professional traders overcharge for upside or downside protection.

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If investors expect the price of Ether to rise, the skew indicator moves to -12% or lower, signaling general excitement. On the other hand, a skew of more than 12% indicates a reluctance to pursue bearish strategies, typical of bear markets.

Ether 30-day options 25% delta skew: Source: Laevitas.ch

For reference, the higher the index, the less likely traders are to determine downside risk. As shown above, the skew indicator exited “fear” mode on July 16 as ETH broke above the $1,300 resistance. Thus, those options traders no longer have a greater chance of a market downturn as the skew remains below 12%.

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Margin Traders Reduce Bullish Bets

To confirm whether these movements were limited to the specific option instrument, one should analyze the margin markets. Lending allows investors to use their positions to buy more cryptocurrency. When those savvy traders open margin longs, their gains (and potential losses) depend on Ether’s price rise.

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Bitfinex margin traders are known for creating position contracts of 100,000 ETH or higher in a very short time, indicating the participation of whales and major arbitration agencies.

Bitfinex ETH margin longs. Source: Coinglass

Ether margin longs peaked at 500,000 ETH on July 2, the highest level since November 2021. However, data shows that those savvy traders lowered their bullish bets as the ETH price recouped some of its losses. Data shows no evidence that Bitfinex margin traders are anticipating the 65% correction from May to below $1,000 in mid-June.

Options risk stats show that professional traders are less afraid of a possible crash, but at the same time, margin market players have reduced bullish positions as the ETH price tries to gain a $1,600 support.

Apparently, investors will continue to monitor the impact of nominal TVL deposits and the demand for smart contracts on network gas rates before deploying additional bullish.

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