ETH derivatives volume suggests that Ethereum investors have little confidence in the Spot Ethereum ETFs, sparking a massive rally for the second-largest crypto token by market cap. This development comes amid the imminent launch of these funds, which are expected to begin trading next week.
Ethereum Futures Premium Highlights Little Confidence In ETH’s Price
According to data from Laevitas, Ethereum’s fixed-month contracts annualized premium currently stands at 11%, suggesting that crypto traders aren’t bullish enough on ETH’s price. Further data from Laevitas shows that this indicator has yet to sustain levels above 12% this past month.
Related Reading
This is surprising considering that the Spot Ethereum ETFs, which could launch next week, are expected to spark a price surge for Ethereum. Crypto analysts like Linda have predicted that ETH could rise to as high as $4,000 thanks to the inflows these Spot Ethereum ETFs could witness.
However, crypto traders are not convinced that Ethereum’s reaching such heights is likely to happen, at least not soon enough. A plausible explanation for this lack of excessive bullishness is that Ethereum’s price could continue to trade sideways for a while, thanks to the $110 million daily outflows that research firm Kaiko projected could flow from Grayscale’s Spot Ethereum ETF.
Moreover, this seems likely following the final S-1 filings by the Spot Ethereum ETF issuers, which showed that Grayscale has the highest fees. The asset manager plans to charge a management fee of 2.50%, while the highest fee among other Spot Ethereum ETF issuers is 0.25%.
Grayscale had done something similar with its Spot Bitcoin ETF, setting its management fee at 1.5%, while the other Spot Bitcoin ETF issuers had management fees ranging between 0.19% and 0.39%. That move is believed to have been one of the reasons why Grayscale’s Bitcoin ETF witnessed significant outflows following the launch of the Spot Bitcoin ETFs.
Making A Case For Ethereum’s Inevitable Price Surge
Crypto analyst Leon Waidmann has made a bullish case for ETH’s price and explained why Ethereum investors should be more bullish. He noted that the discount between Grayscale’s Ethereum Trust (ETHE) and ETH’s price has significantly narrowed since the Spot Ethereum ETFs were approved earlier in May.
Related Reading
Waidmann stated that this has given ETHE investors ample time to exit their positions without significant discounts compared to Grayscale’s Bitcoin Trust (GBTC). Another reason GBTC is believed to have experienced such outflows was because of investors who were taking profits from having invested in the trust at a discounted price to Bitcoin’s spot price.
However, unlike GBTC and other Spot Bitcoin ETFs, ETHE and other Spot Ethereum ETFs didn’t start trading immediately after approval. Therefore, Waidmann believes that whoever intended to profit from the discount between ETHE and ETH’s price must have already done so before now. As such, Grayscale’s ETHE shouldn’t witness the same amount of profit-taking as Grayscale’s GBTC did after it began trading.
Featured image created with Dall.E, chart from Tradingview.com
The price of Bitcoin remained pretty volatile during the previous week, but it more or less stabilized over the weekend as the price remained largely flatlined after digesting the recent Silvergate crisis. However, Bitcoin’s price is currently under pressure as traders and investors brace for a major event that is set to take place on Tuesday in the United States.
Bitcoin Price At Risk On Powell’s Speech?
The flagship cryptocurrency is coming under significant selling pressure as the crypto market awaits the testimony of the Federal Reserve Chair, Jerome Powell, at the U.S. Senate hearing scheduled tomorrow. Market participants are expected to examine his speech in search of any hints that could indicate Powell adhering to his disinflationary strategy or backtracking his views and signaling towards a revamp of policy tightening procedures.
Read More: Check Out The Top 10 DeFi Lending Platforms Of 2023
In case, Powell hints at the latter, it would come as a significant blow to risk assets like Bitcoin and usher in a complete crypto crash — wiping out all the gains in an instant. Since the markets have not heard from Chairman Powell in more than three weeks, they will be particularly eager to hear what the Fed Chief has to say and whether there is a possibility of a bigger interest rate hike for the month of March. There are already market-wide speculations on a potential 50bps rate hike, which would be significantly higher than the last hike of 25bps.
Should You Buy The Dip? Trading Data Suggests So
According to a prominent crypto trading expert, who goes by the pseudonym MacroCRG on Twitter, acknowledged the fact that the Open Interest (OI) for BTC had risen significantly with the addition of $100 million, although the price remained stagnant. For the unaware, OI is a measure of the flow of money into a futures or options market. Increasing open interest represents new money entering into the market while decreasing open interest indicates money flowing out of the market.
Moreover, he goes on to mention that holding a long position in Bitcoin would be particularly prudent in the event that Bitcoin’s price drops early in the week while all the existing long transactions are being liquidated. This scenario would make a lot of sense if in case BTC gets crushed after the Fed’s testimony as discussed earlier. As a result, if there are any price dips, it may present traders and investors with a viable buying opportunity.
Additionally, it should be noted that BTC’s technical analysis (TA) indicators at CoinGape’s crypto market tracker recommend a “Neutral” position as summarised by moving averages that suggest a “sell” at 9 and “buy” at 9 as well. As things currently stand, the price of Bitcoin (BTC) is trading at $22,452 which represents a gain of 0.06% over the past 24 hours, in contrast to a drop of 5.75% over the last seven days.
Also Read: AI Crypto Token Fetch.AI Reveals Ambitious 2023 Roadmap; FET Price Poised For Bull Run?
The presented content may include the personal opinion of the author and is subject to market condition. Do your market research before investing in cryptocurrencies. The author or the publication does not hold any responsibility for your personal financial loss.
Bitcoin trends higher in the last few days as it approaches the mid area around its current levels. The benchmark crypto has seen some relief in the past days but seems unlikely to fully reclaim its previous bullish momentum.
Related Reading | Data: Bitcoin Long-Term Holder Supply Has Stagnated Since October High
At the time of writing, Bitcoin trades at $42,500 with a 4% profit in the last day and a 12% profit over the last two weeks.
As NewsBTC has been reporting, Bitcoin seems to be reacting to the U.S. Federal Reserve (FED) shift in monetary policy and the armed conflict between Russia and Ukraine. The financial institution announced a rate hike of 25 basic points (bps) for the coming months.
This increment meets market expectations. No major announcement is expected from the FED in the short term.
As for the armed conflict, attempts to reach a diplomatic solution have failed, with no clear winner on the battlefield. The parties seem to be at a stalemate.
This tense calm has moved to the market and the uncertainty could lead Bitcoin into further consolidation between its current levels, and the high area around $30,000.
In support of this thesis, Arcane Research records no major movements in Open Interest (OI) for the BTC-based derivatives sector. This metric has remained stable at around 360,000 BTC and 380,000 BTC since the start of 2022.
As seen below, the OI for BTC futures has been moving sideways along the price of Bitcoin, as it registers a decrease in volatility. In other words, the BTC market could be experiencing a period of low activity which suggests no important trends in either direction.
The Last Time Bitcoin Open Interest Hinted At Consolidation
The 30-day volatility for Bitcoin OI futures, as Arcane Research reported, saw a 1% low in March, and has trended a bit higher in the last two weeks. The metric currently stands at 1.5%.
The research firm claims current trading activity has been lower than during a similar period of consolidation in 2021. Arcane Research added:
Overall, the BTC denominated open interest remains relatively lofty at 370,000 BTC. We’ve rarely seen open interest being maintained at such levels for such a long duration without any major squeeze setbacks such as those experienced during the spring and fall bull markets and bitcoin’s short squeeze in July.
Additional data provided by Santiment indicates Bitcoin’s supply on exchanges has been trending down as the price of BTC consolidates.
In June 2021, this metric saw a 6-month low as the market recovered from bearish price action. As BTC’s price moved further up, the supply followed, but the cryptocurrency managed to score a new all-time high near $70,000.
Related Reading | Ethereum Classic Gains 60% In One Week, Why The Merge Could Push Its Price Higher
The chart below could be hinting at a similar trend as supply on exchanges decreases, and the price consolidates.
