Cryptocurrency News

Ethereum Has Strong Fundamentals, So Why Are Pro Traders Bearish On ETH?


ether (ETH) has outperformed bitcoin (B T cDerivatives metrics show bearish elements in both assets, despite up 32% since May and reports of continued bullishness from JPMorgan and Goldman Sachs.

Ether and bitcoin price changes since May. Source: TradingView

Bitcoin is trading down 41% from its all-time high of $64,900 and the move has prompted “Crypto Fear and Greed Index” At the lowest level since March 2020. There is a fear of decline in retail business, but professionals like Global investment firm Guggenheim Investments Has filed with the United States Securities and Exchange Commission for a new fund that could be exposed to bitcoin.

billionaire investor Stanley Druckenmiller reiterates his bullish stance on bitcoin When he said:

“I think BTC has won the store of value game because it is a brand, it has been around for 13-14 years and has a limited supply”.

Ethereum network speed has been excellent

Ethereum beats bitcoin in terms of miner revenue and network value, which is true as of a report Goldman Sachs unveils global investment bank believes that ether has a “high potential to overtake bitcoin as a major store of value.” The report noted the development of the decentralized finance sector and the non-fungible token ecosystem being built on Ethereum.

Bitcoin and Ethereum network miners revenue, USD. Source: CoinMetrics

Note how the revenue of Ethereum miners far outstripped that of Bitcoin in May, reaching a daily average of $76 million. This figure jumped bitcoin’s $45 million in revenue to miners, which includes 6.25 subsidies per block, as well as transaction fees.

A similar situation occurred in the amount of transactions and transfers on each network. For the first time according to this metric, Ethereum presented a significant advantage.

Bitcoin and Ethereum Network Average Daily Transactions, USD. Source: CoinMetrics

The chart above shows that the Ethereum network handles an average of $25 billion in settlements per day, which is 85% more than Bitcoin. Stablecoins have certainly played an important role, but decentralized finance applications have locked in a net worth of $50 billion.

Futures premium is slightly bearish

When measuring futures contract premiums, both Bitcoin and Ether exhibit a similar level of bearishness. The base rate measures the difference between long-term futures contracts and current spot market levels.

One-month futures contracts typically trade at a 10%-20% premium versus regular spot exchanges to justify locking in rather than cashing out funds immediately.

OKEx Bitcoin and Ether Futures Annual Premium (basis). Source: slant

As depicted above, the futures premium for both bitcoin and ether has been less than 10% since the May 19 crash. This indicates a slight bearish, albeit far from a negative indicator, which is known as backwardation.

Ether’s 25% delta skew signals “fear”

To gauge the optimism of EtherTrader, one must look at the 25% delta skew. The metric turns positive when the neutral-to-bearish put option premium is higher than that of equal-risk call options. This situation is usually considered a “fear” scenario. On the other hand, a negative slant translates to a higher cost of upside protection and indicates a bullish trend.

Ether options 25% delta skew. Source: Laevitas.ch

Similar to futures premiums, Ether Options’ 25% delta skew has been up from 10% since May 19. This indicates that market makers and whales are unwilling to offer downside protection, indicating “fear”.

Although far from overly bullish, both ether derivatives indicators point to a complete lack of bullish momentum despite the altcoin gaining 270% year-on-year.

In the face of this disappointing data, some analysts will find the “glass half full” because it leaves room for positive surprises. Ethereum Improvement Proposal 1559, or EIP-1559, expected for July, will create a base network fee that will fluctuate based on network demand. The update also proposes to burn transaction fees, thereby triggering deflation in the Ethereum ecosystem. OKEx analyst Rick Delaney said this “could increase the asset’s appeal among the world’s wealthiest investors.”

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