Ethereum Shillers Asking $ 5,000 ETH, And This Time Derivatives Data Backs It Up


Ether (ETH) pundits are shouting that the $ 5,000 price tag has been ‘programmed’ since 2018, and some are going even further by claiming $ 20,000 in the long run.

Part of these bullish calls are based on ETH 2.0 staking and the resulting inflation reduction from EIP-1559.

The estimate of $ 20,000 equates to a market cap of $ 2.36 trillion, and while it is doable, it still looks overly bullish at the moment.

Ether entered an ascending channel on September 20, indicating that $ 5,000 will become a support level by the end of November.

Ether price in USD at the Kraken. Source: TradingView

Locked-in net worth growth, or adjusted TVL, on Ethereum network smart contracts supports recent strength. TVL measures assets deposited on decentralized applications and is typically driven by loan protocols and DEX exchanges.

Total locked-in value adjusted by Ethereum Network (TVL) in USD. Source: DeBank.com

Ether’s TVL broke the previous high of $ 71 billion on October 16, racking up a 50% gain in three months through October 31.

Adverse regulatory winds from US lawmakers could drive investors away from cryptocurrencies. Many states in the United States, including Kentucky, Texas, Alabama, Vermont, New Jersey, and most recently New York, have cracked down on crypto lending.

Additionally, in October, the New York-based decentralized prediction marketplace, Polymarket, was investigated by the U.S. Commodity Futures Trading Commission (CFTC). According to a Bloomberg Report from Oct. 23, the agency assesses whether the decentralized finance (DeFi) application allows its clients to trade binary options and swaps without the necessary regulatory approval.

On the flip side, some investors expect a positive move in traditional markets to further stimulate the recovery. Data shows November was the best performing month for the S&P 500 since 1985.

Professional traders believe the price of ETH will rise

To confirm investor confidence in the fulfillment of the $ 5,000 prophecy, one should watch the monthly contract premium, called “base.” Unlike the perpetual contract, these fixed-calendar futures do not have a funding rate, so their price will be very different from regular spot exchanges.

By measuring the spending spread between futures contracts and the regular spot market, a trader can gauge the level of optimism in the market. Whenever buyer optimism is excessive, the three-month futures contract will trade at an annualized premium of 15% or more (base).

Base rate on 3-month ether futures. Source: Laevitas.ch

Note that even the 9.5% correction in the price of ETH on October 27 from $ 4,300 to $ 3,900 was not enough to break the morale of these traders. Currently, the base rate stands at 17%, which signals a moderate uptrend.

Options markets show a moderate uptrend

Ether hit an all-time high of $ 4,460 on October 29 and to determine how bullish traders are we need to look at the 25% delta skew. This indicator provides a reliable ‘fear and greed’ analysis by comparing similar call (buy) and sell (sell) options side by side.

The measure will turn positive when the premium of neutral to bearish put options is higher than that of similar risk calls. This situation is generally considered to be a “fear” scenario. On the other hand, a negative bias results in a higher cost of upside protection and indicates an uptrend.

Deribit Ether 60 day options 25% delta asymmetry. Source: laevitas.ch

The chart above shows the indicator at minus 9, flirting with the ‘greed’ momentum. This bullish stance began on October 18, which wasn’t exactly a positive day for Ether as it tested the $ 3,700 support on multiple occasions.

The two derivative indicators are at the limit of a neutral to bullish zone, which should be interpreted as very positive as it leaves room for the leverage of buyers using derivative instruments.

Based on the metrics of futures and options, perma bulls calling $ 5,000 are likely to be correct in the short term.

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph. Every investment and trade move involves risk. You should do your own research before making a decision.


About Harold Shirley

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