Ether (ETH) has been trading below $3,750 for the past three days, despite the upcoming launch of the coin’s spot exchange-traded funds (ETFs) in the United States. Some suggest that the lack of bullish momentum for ETH is a result of the uncertainty surrounding how long it will take for individual S-1 fund filings to be approved by the regulator. Despite this, the optimism of Ether investors, as indicated by derivatives metrics, has dropped to a three-week low.
Regulatory ambiguity weighs on ETH price
Even if the U.S. Securities and Exchange Commission (SEC) greenlights the filings from BlackRock, Fidelity, VanEck, and other companies this week, investors are concerned that the current market conditions may not be conducive to the demand for Ethereum ETFs. The hesitancy towards cryptocurrencies stems from regulatory uncertainties, as well as apprehensions about the macroeconomic landscape, particularly with the real estate market showing signs of strain.
Coinbase, Binance, and Kraken are currently embroiled in legal proceedings for allegedly failing to register as brokers when offering securities investments. The U.S. SEC and the U.S. Department of Justice have also taken action against crypto firms that incorporated privacy tools like Samourai Wallet and Tornado Cash. Additionally, regulators argue that Ether staking services could be classified as securities, given the promise of returns in exchange for the efforts of others.
Even without any imminent developments on the crypto regulatory front, investors are uneasy about holding assets that are considered riskier during a potential economic downturn. Moody’s Ratings warned on June 6 that at least six U.S. regional banks are at risk of credit rating downgrades due to their significant exposure to commercial real estate, which is suffering from higher interest rates.
A report by The New York Times on May 24 highlighted the Chinese housing market, where nearly four million unoccupied apartments are without buyers. Government incentives to purchase these properties with state-backed loans failed to prevent a crash in housing prices, emphasizing that developers teetering on the edge of default are closely linked to local banks and the financial system.
The challenging macroeconomic conditions help explain why Bitcoin (BTC) struggled to surpass $71,000 on June 7, leading to reduced expectations among Ether investors regarding potential inflows from a spot Ethereum ETF. This pessimistic sentiment is reflected in ETH futures and options metrics, which have reached their most negative point in over three weeks.
Dwindling confidence in Ether derivatives markets
Professional traders tend to favor monthly contracts due to the absence of a funding rate. In neutral markets, these instruments often trade at a premium of 5% to 10% to accommodate their extended settlement period.
Data shows that the ETH futures premium decreased to 13% on June 10, down from 15% on June 6. While not yet signaling a bearish trend, this marks the lowest level in more than three weeks. This contrasts with some analysts’ predictions that Ethereum ETFs could attract up to 20% of Bitcoin’s inflows in similar instruments.
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Traders should also assess options markets to gauge investor sentiment. An increase in the 2-month delta skew above 8% suggests expectations of an Ether price drop, while periods of excitement tend to lead to a negative 8% skew.
The ETH options 25% delta skew last leaned bullish on May 29, but the current -6% level indicates a neutral and balanced outlook, with whales and market makers assigning similar probabilities to positive and negative price movements for Ether.
With Ether futures and options signaling reduced optimism in light of the forthcoming spot Ethereum ETF launch in the U.S., it appears unlikely that ETH price will surpass $4,000 in the near future.
This article is intended for informational purposes only and should not be construed as legal or investment advice. The opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.