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Sunday, November 28, 2021

Ethereum Price Has Dropped Under $3,000

Although Ethereum might be down by 30% from its 12th May high of $4,380 on the 28th of September, the current price is definitely higher by 78%. This is a classic ‘glass half full situation, and one needs to analyze how pro and retail traders usually position themselves according to the markets of derivatives.

 Chronologically, the 24th of September saw Chinese authorities announcing newer measures that would curb the adoption of crypto, which led the second largest cryptocurrency- Ethereum- mining pool to shut its operations down on the 27th of September. According to Sparkpool, the measures have been designed to push for the safety of the assets of users in response to governmental regulatory policy requirements. 

Pro traders are neutral, but Ethereum fear is starting to settle in

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In order to properly assess where professional traders would be moving more towards a bullish outlook, experts need to analyze futures premium first- which is also referred to as the rate of basis. This indicator puts forth the price gap between the regular spot market, as well as the futures contract prices.

As it stands, the quarterly features of Ethereum have always been the preferred instruments for arbitrage desks and whales. And while it could seem a tad bit too complicated for retail traders due to the price difference from regular spot markets, one of the biggest advantages they have is a complete absence of a fluctuating rate of funding. 

The futures over three months usually come up with a trade of 5% to 15% annualized premium, which is comparable to the lending rate of stablecoin. By postponing settlement, sellers would demand a much higher price which led to a price difference. As it can be understood, the dip of Ethereum below the price of $2,800 on the 26th of September did cause the rate of basis to juggle against the 5% threshold. 

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