One of the main driving factors of the current bullish sentiment is the launch of CME ETH futures and Grayscale Investments’ ETH trust approaching $6.3 billion under management. The decentralized finance phenomenon also extends, as there is currently higher than $21 billion worth of Ether locked in DeFi.
As stated by its methodology, the Crypto Fear & Greed Index is currently at 93, registering “Extreme Greed.” Many traders practice the metric as a counter-trading signal — indicating the intense fear level can sign that investors are bullish and a purchasing opportunity is present. In opposition, when investors are getting too greedy, it could be a sign that the market is slated for a correction.
Unlike the extremely leveraged retail traders, the more qualified market makers and whales have been suspicious of Ether’s never-ending rally. Despite the price peak, the 36% price correction that resulted was stimulated by large liquidations.
The liquidation of $2 billion in long futures records from Feb. 19 to Feb. 23 drew 28% of the total open interest. Therefore, one should foresee a significant decline in market sentiment, as described on the previous Fear & Greed indicator.
Surprisingly, none of that occurred on the Ether derivatives markets, as both the futures contracts premium (contango) and the options skew continued bullish.
The futures premium existed at very healthy levels.
By estimating the price gap between futures and the stock spot market, a trader can measure the level of bullishness in the market.
The three-month futures habitually trade with a 10% or higher premium versus conventional spot exchanges. Whenever this indicator decreases or becomes negative, this is a startling red flag. This situation is recognized as “backwardation” and betokens that the market is turning bearish.
The chart reveals that the indicator rose at 39% on Feb. 20 as Ether touched its all-time high. Nonetheless, it has kept over 16% throughout the entire correction falling to $1,300. This data reveals that professional traders endured confidence in Ether’s price potential.
The options skew persisted neutral-to-bullish.
When analyzing options, the 25% delta skew is the single-most consistent measure. This indicator examines similar call (buy) and put (sell) options side-by-side.
It will become negative when the put options premium is more distinguished than similar-risk call options. A negative skew alters to a higher cost of downside protection and registers bullishness.
The reverse holds when market makers are bearish, making the 25% delta skew indicator reach the positive ground.