Ether’s (ETH) futures premium has gone through a complete cycle, from April’s extreme euphoria to the present level, which is the most bearish in six months.
Believe it or not, in both situations, Ether’s price was roughly $2,100. This change shows how investors’ mood depends on a few weeks’ performances and holds no relation to longer timeframes.
By analyzing the futures markets’ price difference versus regular spot exchanges, traders can better understand how the price move has impacted professional traders. Typically, the 3-month futures should trade with an 8% to 15% annualized premium, comparable to the stablecoin lending rate. By postponing settlement, sellers demand a higher price, causing the price difference.
On April 13, the Ether futures premium peaked at 47%, indicating extreme optimism. Ether had rallied 36% to a $2,150 all-time high on April 2, and euphoria settled in as it surpassed the $2,200 resistance. At the same time, the decentralized finance (DeFi) net value locked reached $50 billion, and analysts painted a $10,000 target for year-end.
The bull run was also fueled by EIP-1559 expectations, a proposal that could result in Ether being burned at a rate exceeding the creation of new supply.
On April 17, a 20% crash took place, causing a $1 billion long futures liquidation. That number represented 12.5% of the outstanding contracts, reducing the 3-month futures premium to 25%. This optimistic level carried on as Ether recovered the $2,500 mark.
What caused the change in sentiment?
On April 25, Ether initiated a 100% rally that took the price to $4,170 in just 17 days. One would expect the 3-month premium to have soared above 40%, but that did not happen. Somehow, longs were less likely to use excessive leverage compared to the previous month. Traders seemed skeptical of the surprising rally above $3,000 and therefore avoided leverage longs.
On May 19, as Ether posted a 45% flash crash down to $1,870, the futures premium finally abandoned its optimistic level and moved below 16%. The futures premium remained relatively steady at 17% even as Ether’s price crashed 30% between May 12 and May 17. From what the data shows, most traders refused to believe that the trend had reversed and kept opening leveraged long positions despite the $2.8 billion liquidations.
Ether futures finally completed the entire cycle as the futures premium went below 8% on May 21, marking a bearish sentiment. It is worth noting that this level was unseen since early November 2020.
The chart above shows just how short-sighted traders are as Ether’s price is 450% above the $380 seen in November 2020. The futures open interest soared from $1 billion to the current $5.4 billion. Moreover, daily active addresses on the network rose from 550,000 to 750,000.
As things currently stand, there isn’t a single metric pointing to worsening fundamentals compared to 6 months ago.
However, investors seem unable to display bullishness due to the recent 56% correction in 12 days. The lesson here is that investors should ‘zoom out’ instead of blindly trusting short-term market indicators and sentiment.
The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk. You should conduct your own research when making a decision.
Will Smith’s Son, Rapper and Actor Jaden Smith, Posts Mysterious “ETH” Tweet
Jaden Smith joins the crypto-celebrity list with two tweets in a row
The “Icon” author, rapper, Hollywood actor and mega-star, Will Smith’s son Jaden Smith, has posted a mysterious “ETH” tweet that followed a “Web3” publication shortly after.
The purpose behind the two tweets has not been disclosed, but it is most likely tied to the rising popularity of the two industries. Previously, Ethereum’s price has reached the new ATH, which might have caught the famous rapper’s attention.
ETH— Jaden (@jaden) October 22, 2021
Both crypto-related tweets have been warmly welcomed by the audience, collecting approximately 8,000 likes and more than 1,000 retweets on Twitter. In the comment section of the Web3 tweet, Jaden said that he actually owns an NFT just like his industry partner Snoop Dog.
With the rapid price increase of the Bitcoin, DeFi and NFT industries, more celebrities are exploring cryptocurrencies and blockchain technologies. In addition to giving significant investment returns, digital assets technologies may potentially change the banking, finance and art industries in the future.
Ripple CEO Says the SEC Helped Ethereum to Surpass XRP as No.2 Crypto
- Ripple CEO aired his opinion on the crypto market and regulations.
- Brad Garlinghouse said the US SEC granted Ethereum regulatory green light.
At the DC Fintech Week virtual conference on October 21, Ripple CEO Brad Garlinghounse aired his thoughts on the state of the crypto market and regulations. Besides, he holds a grudge over the financial regulator’s approach to Ethereum.
In addition, Garlinghouse declared that the US Security and Exchange Commission (SEC) granted Ethereum regulatory green light that enabled it to surpass his firm’s XRP token.
Likewise, the Ripple boss feels that his firm has been played out. But, at the same time, Ethereum’s subsequent success is at least in part down to more favorable treatment by the US SEC. Also, Garlinghouse stated that it is affecting its market. He said,
“Within the last few years, XRP was the second most valuable digital asset. As it became clear the SEC had given a hall pass to ETH, ETH obviously has exploded, and that clarity has helped.”
To clarify, XRP was the second-largest crypto asset by market cap in late December 2017. But, currently, it has dropped to seventh place while Ethereum has kept the second spot ever since.
Furthermore, the reason why XRP dropped is the US SEC pursuing Ripple over claims that XRP is unregistered security. In fact, in January, Ripple filed a Freedom of Information Act request with the US SEC demanding to know why it didn’t consider ETH security.
As a result, later in July, a district judge allowed the firm to depose a former official who declared in 2018 that ETH was not a security.
Ripple CEO reinstates SEC bias towards ETH, claiming XRP could’ve been No.2
It is not news that the ongoing XRP lawsuit has got the better of Ripple’s XRP token. Ripple CEO, Brad Garlinghouse recently questioned the SEC’s bias towards Ethereum, claiming that XRP would’ve been at the No. 2 position instead of ETH if it weren’t for the commission’s partial crackdown. Garlinghouse spoke at the DC Fintech Week virtual conference yesterday, arguing that the U.S. Securities and Exchange Commission alleged Ripple’s XRP as unregistered security while granting Ethereum a regulatory free pass, which in turn helped ETH shoot through the roof.
“Within the last few years, XRP was the second most valuable digital asset. As it became clear the SEC had given a hall pass to ETH, ETH obviously has kind of exploded and that clarity has helped.”
XRP secured the position of the second-largest crypto asset by market capitalization during the latter half of 2017. However, the token has dropped down to seventh place while Ethereum stands strong as No. 2. Furthermore, Garlinghouse claims that the SEC’s exclusively aggressive anti-crypto stance to allegedly protect the consumers is in fact anti-investors. Referring to the XRP lawsuit, Ripple CEO emphasizes that “nearly 50,000 U.S. people who hold XRP who are trying to sue the SEC for ‘protecting them’”.
XRP Holders left with bearish and frozen funds
Earlier this week, Attorney Deaton Filed a Letter Motion on behalf of the XRP Holders (Movants) that contended SEC’s extension request, with the main argument concerning the XRP holders’ frozen funds because of the consistent postponement of the lawsuit’s final verdict. During the ongoing bull run, XRP remains considerably bear because of the regulatory crackdown on Ripple. However, the court has overlooked the community’s concern and granted the extension explaining that in lieu of pending motions, extra time will only facilitate both parties to complete pending fact discovery and thoroughly prepare for upcoming expert depositions.
“The lack of liquidity within the United States, coupled with the mass de-listings prevents XRP Holders from trading, selling, transferring, or converting their XRP. It is because of this de facto in place seizure of their property that XRP Holders took the extraordinary step to seek intervention as defendants… Any delay in the underlying action marks yet another day XRP Holders do not have access to their funds.”, wrote Deaton.