Ethereum Futures Premium Hits A 7-month Low as ETH Tests The $2,400 Support

About Ethereum

Ethereum is open source and used primarily to support the second largest cryptocurrency in the world known as Ether. Ethereum enables the smart contracts and application built on it’s blockchain to run smoothly without fraud, downtime, control or any third party interference.

Making Money out of Ethereum

Ethereum is created in the process of “mining” which is the computing process that makes it work. Miners, those people who run computers that process all the transactions, are paid in new ethereum.

Blockchain and Cryptocurrency

A blockchain is a distributed database that is shared among the nodes of a computer network. As a database, a blockchain stores information electronically in digital format. Blockchains are best known for their crucial role in cryptocurrency systems, such as Bitcoin, for maintaining a secure and decentralized record of transactions.The innovation with a blockchain is that it guarantees the fidelity and security of a record of data and generates trust without the need for a trusted third party.

Market Analysis

Ether (ETH) reached a $3,280 local high on Feb. 10, marking a 51.5% recovery from the $2,160 cycle low on Jan. 24. That price was the lowest in six months, and it partially explains why derivatives traders’ main sentiment gauge plummeted to bearish levels. ETH price dropped 30% in two weeks, and derivatives data shows pro traders are bearish even with Feb. 25’s rally back toward $2,800.

Ethereum Futures Premium Valuation

Ether’s futures contract annualized premium, or basis, reached 2.5% on Feb. 25, reflecting bearishness despite the 11% rally to $2,700. The worsening conditions depict investors’ doubts regarding the Ethereum network’s shift to a proof-of-stake (PoS) mechanism. As reported by Cointelegraph, the much-anticipated sharding upgrade that will significantly boost processing capacity should come into effect in late 2022 or early 2023.

Adjustment Analytics about Ethereum Futures

Analyzing Ether’s performance from a longer-term perspective provides a more appealing sentiment, as the cryptocurrency is currently 45% below its $4,870 all-time high. Furthermore, the Ethereum network’s adjusted total value locked (TVL) has held a reasonable 42.8 million ETH despite the price correction.

Reflecting Growth of DeFi and NFTs

As shown above, the network’s TVL increased by 16.5% in three months, reflecting growth from decentralized finance (DeFi) and nonfungible token (NFT) marketplaces. However, due to network upgrade delays and worsening global macro conditions, professional traders are becoming frustrated and anxious, a sentiment that is depicted in multiple derivatives metrics.

Ether Futures Hit Their Most Bearish Level in Seven Months

Retail traders usually avoid quarterly futures due to their fixed settlement date and price difference from spot markets. However, the contracts’ biggest advantage is the lack of a fluctuating funding rate, hence the prevalence of arbitrage desks and professional traders. These fixed-month contracts usually trade at a slight premium to spot markets because sellers are requesting more money to withhold settlement longer. This situation is known technically as “contango” and is not exclusive to crypto markets.

Ether’s Annualized Premium in Healthy Markets

Futures should trade at a 5%–15% annualized premium in healthy markets. Yet, as displayed above, Ether’s annualized premium has decreased from 20% on Oct. 21 to a meager 2.5%. Although the basis indicator remains positive, it has reached the lowest level in seven months.

Current Ethereum Cash Valuation

The crash to $2,300 on Feb. 24 caused bearish sentiment to prevail, and not even Feb. 25’s 10% recovery was enough to flip the tables. Currently, data shows few signs that bulls are ready to regain control. If this were the case, the Ether futures premium would have turned positive after such a rally.



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