ETH Traders Eye $3K, But Historical Data Reveals Red Flags

The price of Ether has been rising steadily over the past 10 days, gaining 21.5% and approaching the $2,800 mark. This upward trend in cryptocurrencies is largely attributed to the success of the recently launched Bitcoin exchange-traded fund (ETF) in the US. Ether has other factors that could push its price above $3,000, a level it struggled to maintain in March 2022.

Ether’s position as the second-largest cryptocurrency, along with the possibility of having its own spot ETF listed on US exchanges, gives it an advantage over competitors like Solana and BNB Chain. This would also bring more clarity and regulatory certainty for investors, as exchanges such as Binance and Coinbase still face lawsuits from the US Securities and Exchange Commission (SEC) regarding their security offerings.

Another positive factor for Ether is the upcoming Dencun network upgrade on March 13. This upgrade aims to lower transaction costs on the Ethereum layer 2, making it more attractive for users and increasing demand for Ether. The upgrade could also lead to more usage of decentralized applications (DApps) and increased activity in smart contracts.

While there are many reasons to be optimistic about Ether reaching $3,000, history shows that sustaining such a price level is challenging. In April 2022, Ether experienced a significant rally before seeing a sharp decline of 46% in the following 40 days. Traders are now wondering if a similar outcome could happen this time.

To analyze the market sentiment, one important metric to consider is the futures premium of Ether. Currently, the premium is around 15%, indicating that traders are demanding more leverage as the price of Ether rises. This level is not considered excessive. In contrast, the premium in April 2022 was only 5.5%, which is seen as neutral.

Analyzing the options markets can also provide insights into professional traders’ positions. The 25% delta skew, which measures the expected price movements, is currently at low levels, indicating a moderate degree of optimism. This aligns with the futures data and suggests a balanced sentiment between bullish and bearish traders.

Traders who are betting on an increase in Ether’s price based on the potential approval of the Ethereum spot ETF may face disappointment. While the odds of approval currently stand at 70%, the final deadline for the SEC is not until May 23. This means that there is a significant risk of price volatility and potential liquidation even if Ether surpasses $3,000 before the event.

The derivative metrics for Ether suggest a different scenario compared to April 2022. While there are reasons to be hopeful, nothing is guaranteed for Ether bulls.