Ether (ETH) has been experiencing a consistent upward trend over the past 10 days, with gains of 21.5% as it approaches the $2,800 mark. The surge in cryptocurrency prices can be attributed to the strong inflow into the newly launched Bitcoin (BTC) exchange-traded fund (ETF) in the U.S. However, Ether has additional factors that could potentially push its price above $3,000, a level that proved challenging in March 2022. Will Ether’s rally to $3,000 yield different results this time?
From a bullish standpoint, Ether has the potential to solidify its position as the second cryptocurrency to have its spot ETF listed on U.S. exchanges. This would set it apart from competitors like Solana (SOL) and BNB Chain (BNB) in terms of accessibility and regulation. Exchanges such as Binance and Coinbase are still facing legal action from the U.S. Securities and Exchange Commission (SEC) regarding their security offerings. Therefore, the approval of an Ethereum ETF in the U.S. would significantly reduce uncertainty for investors.
Other positive factors for Ether include the anticipated Dencun network upgrade on March 13. This hard fork aims to lower transaction costs on the Ethereum layer 2 by providing more block space and reducing gas costs for rollups. These changes could potentially increase the usage of decentralized applications (DApps) and drive more deposits into smart contracts, creating higher demand for ETH.
While Ether bulls have several reasons to believe that $3,000 is within reach, historical data shows that sustaining such a price level is challenging. For example, prior to April 3, 2022, ETH experienced a 42% gain, rising from $2,520 to $3,580. However, the rally proved to be unsustainable as the price plummeted by 46% in the following 40 days. Traders are now questioning whether Ether could face a similar outcome this time.
To gain insight into Ether’s market sentiment, it is important to analyze the futures premium. This metric indicates the leverage demand between buyers and sellers. Professional traders typically prefer monthly futures contracts due to their extended settlement period, which results in a 5% to 10% premium. Data shows that the ETH futures premium surpassed the 10% neutral threshold on February 10 and currently sits around 15%. Although not considered excessive, this level suggests that bulls are seeking additional leverage as ETH climbs from $2,300 to its current price of $2,800. In comparison, the annualized premium in early April 2022 was 5.5%, indicating a more neutral market.
Another aspect to consider is the options market, which provides insight into how professional traders are positioned. The 25% delta skew is used as a proxy to gauge market sentiment. A rise above 7% suggests expectations of a price drop, while a negative skew typically indicates excitement in the market. The delta skew metric entered the negative threshold for bullish markets on February 9 and is currently at its lowest levels in three months. These findings align with the futures data and indicate a moderate level of optimism that is not excessive but also not balanced between bulls and bears.
Traders who are betting on a price increase based on the likelihood of the Ethereum spot ETF approval may face disappointment, especially if they use leverage. Despite senior Bloomberg ETF analysts giving the approval odds a 70% chance, the final deadline for the SEC is May 23. This means that there is a significant risk of liquidation due to price volatility, even if ETH surpasses $3,000 prior to the event. However, Ether derivative metrics present a different scenario compared to April 2022, indicating that there is no certainty for ETH bulls.
It is important to note that this article does not provide investment advice or recommendations. All investment and trading decisions involve risk, and readers should conduct their own research before making any decisions.