Ethereum (ETH) is still in problematic waters after failing to break the five-week descent channel top three times in a row. Following the $ 3,000 resistance test on March 2, a 17.5% fix was made in five days. This shows that buyers are somewhat reluctant to keep prices.
To date, Ether has been plagued by high network transaction rates, even though it has fallen from $ 19 in mid-February to $ 13 per current transaction. This is less than the peak seen before, but $ 13 per transaction is incompatible with most games, non-fungible tokens, and even decentralized finance transactions.
Even more worrisome than Ethereum’s performance is the 55% reduction in Ethereum’s total locked value (TVL) on March 8. The data show that the percentage of assets locked in smart contracts has reached a record low compared to competitors.
This indicator may partially explain why Ether has been on a downtrend since early February. But more importantly, we need to analyze how professional traders position themselves, and no gauge is better than the derivatives market.
Futures premium is flat
To understand whether the current bearish trend reflects the sentiment of top traders, we need to analyze Ether’s futures contract premium, also known as “Basis”. Unlike perpetual contracts, these fixed-calendar futures do not have a funding rate, so prices are significantly different from regular spot exchanges.
By measuring the cost gap between futures and the regular spot market, traders can measure the level of bullishness in the market. Conversely, bearish sentiment tends to trade 3-month futures contracts at an annual premium (basis) of 5% or less.
Neutral markets, on the other hand, need to offer a standard of 5% to 15%. This reflects that market participants do not want to fix Ether cheaply until the transaction settles down.
The chart above shows that Ether futures premium bottomed out near 1.5% on February 28th. This is usually a level associated with moderate pessimism. Despite a slight improvement in the current 3% standard, futures market participants are reluctant to open a leveraged long (buy) position.
Long-to-short data confirm lack of excitement
The long-to-short net ratio of top traders excludes externalities that may have affected long-term futures products. Analyzing the positions, perpetual contracts and futures contracts of these top clients will give you a better understanding of whether professional traders are bullish or bearish.
Due to occasional methodological discrepancies between different exchanges, viewers need to monitor changes rather than absolute numbers.
Curiously, when Ethereum’s futures premium bottomed out at 1.5% on February 28, ETH prices were significantly closer to the current $ 2,600. Therefore, it makes sense to compare the short interest ratios of top traders during this period.
Binance shows the same level of top trader Ether position at 0.92 on February 8th and March 8th. However, these whales and market markers from Huobi and OKX have effectively reduced longs. For example, Huobi’s long-to-short ratio has dropped from 1.07 to the current 1.00. In addition, OKX traders’ current 1.47 ratio is smaller than 1.58 eight days ago.
All data show further downsides
From the point of view of the above indicators, it makes little sense that the price of Ethereum will turn bullish in the short term. The data suggest that pro traders do not want to add long positions, as expressed by the basis rate and long-to-short ratio.
In addition, TVL data do not support strong usage indicators for Ethereum smart contracts. Losing a competitor’s position while constantly delaying the transition to a proof of stake solution can distract investors and offend long-term investors.
The views and opinions expressed here are: author It does not necessarily reflect the views of Cointelegraph. All investment and transaction movements carry risks. When making a decision, you need to do your own research.
