A surprise $250 rally took place from October 25 to October 26, pushing Ether (ETH) price from $1,345 to $1,595. The movement caused $570 million in liquidations in Ether’s bearish bets at derivatives exchanges, the largest event in more than 12 months. The price of Ether also rose above the $1,600 level, which is the highest price seen since September 15.
Let’s discover if this 27% gain over the past 10 days reflects any signs of a change in trend.
It is also worth noting that another 10.3% rally to $1,650 occurred three days later on October 29 and this triggered an additional $270 million in short seller liquidation on contracts. ETH futures. In total, $840 million worth of leveraged shorts were liquidated in three days, representing more than 9% of total ETH futures open interest.
On October 21, markets turned bullish after San Francisco Federal Reserve Chair Mary Daly mentioned her intention to slow the pace of rate hikes. However, the previous tightening by the US central bank sent the S&P 500 stock market index down 19% in 2022.
Although the stock market is up 5.5% from October 20 to October 31, analysts at ING noted on October 28 that “we do expect the Fed to open at a slower pace.” Slower degrees through the official guide forward, but it may not necessarily go through it. ” Furthermore, the ING report adds, “It is possible that we get the last 50bp in February, which will then mark the lead. This will leave a terminal rate between 4.75% and 5%. ”
Considering conflicting signals from traditional markets, take a look at Ether derivatives data to understand if investors are backing the recent bull run.
Futures traders keep bearish stance despite $1,600 rally
Retail traders often avoid quarterly futures trading due to the price difference against the spot market. However, they are still the preferred tool of professional traders because they prevent the volatility of funding rates that often occurs in perpetual futures.
This indicator should trade at an annual premium of 4% to 8% in healthy markets to offset the costs and risks involved. Thus, the chart above clearly shows the odds of a bearish bet on ETH futures, as its premium was already in the negative territory in October. Such a situation is unusual and typical. of the bear market, reflecting the reluctance of professional traders to add leveraged (bullish) long positions.
Traders should also analyze the Ether options markets to rule out external factors specific to the futures instrument.
ETH options traders have taken a neutral position
A 25% delta deviation is an indication that when market makers and arbitrageurs are overcharging for bullish or bearish protection.
During a bear market, options traders offer higher odds for dumping, causing the skew indicator to rise above 10%. Bull markets, on the other hand, tend to bring the indicator skewed below -10%, which means that put options are discounted.
The 60-day delta deviation was above the 10% threshold until October 25, and signaling options traders are less inclined to offer downside protection. However, a significant shift occurred in the following days as whales and arbitrage tables began to price in equilibrium risk to downward and upward price movements.
Liquidation shows an unexpected move, but minimal confidence from buyers
These two derivatives indicators show that a 27% price increase in Ether from October 21 to October 31 is not expected, which explains the large impact on the liquidation. Meanwhile, Ether’s 25% gain from August 4 to August 14 caused $480 million worth of leveraged (sellers) short liquidations, about 40% less.
Currently, the prevailing sentiment is neutral according to ETH options and futures markets. As such, traders are likely to be cautious, especially as whales and arbitrage have been sidelined in such an impressive rally.
Until there is confirmation of the strength of the $1,500 support and increased appetite for leverage by professional traders, investors should not rush to conclude that the rally of Ether is sustainable.
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