Ether (ETH) is still in murky water after failing to break a five-week bearish channel top for the third time in a row. The March 2 test of the $3,000 resistance was followed by a 17.5% correction in five days, indicating that buyers are somewhat reluctant to defend the price.
To date, Ether has suffered high network transaction fees, even though it dropped from $19 in mid-February to the current $13 per transaction. While this is less than the spikes seen before, $13 per transaction is still incompatible with most games, non-replaceable token, and even decentralized financial transactions.
Ether/USD price at FTX. Source: TradingView
Even more worrying than Ether’s performance is that the total value locked (TVL) in Ethereum fell by 55% on March 8. Data shows that the percentage of assets locked into its smart contracts hit an all-time low relative to competitors.
This indicator could partly explain why Ether has been in a downtrend since early February. But, most importantly, one has to analyze how professional traders position themselves and there is no better measure than derivatives markets.
The futures premium has leveled off
To understand whether the current bearish trend reflects the sentiment of top traders, one needs to analyze the premium of Ether’s futures contracts, otherwise known as a “base.” Unlike a perpetual contract, these fixed calendar futures have no funding percentage, so their price will be vastly different from regular spot exchanges.
By measuring the cost gap between futures and the regular spot market, a trader can gauge the level of bullishness in the market. Conversely, bearish sentiment tends to have the three-month futures contract trading at an annualized premium of 5% or lower (basis).
On the other hand, a neutral market should have a base of 5% to 15%, reflecting the reluctance of market participants to hold Ether for cheap until the trade is settled.
Ether 3-month futures premium. Source: laevitas.ch
The chart above shows that Ether futures premium reached a low near 1.5% on Feb. 28, a level typically associated with moderate pessimism. Despite the slight improvement from the current 3% basis, futures market participants are reluctant to open long (buy) positions with leverage.
Long-to-short data confirms lack of excitement
The top traders’ long-to-short net ratio does not take into account external factors that may have affected the long-term futures instruments. By analyzing the positions of these top spot clients, perpetual contracts, and forwards, one can better understand whether professional traders are bullish or bearish.
There are occasional methodological differences between different exchanges, so viewers should keep an eye out for changes rather than absolute numbers.
The best traders of exchanges Ether long-to-short ratio. Source: Coinglass
Curiously, when Ether’s futures premium hit a low of 1.5% on Feb. 28, the price of ETH was remarkably close to the current $2,600. So it makes sense to compare the long-to-short ratio of the top traders over this period.
Binance shows the same level of Ether positions from top traders at 0.92 on February 8 and March 8. However, these whales and market markers at Huobi and OKX effectively reduced their long positions. For example, the long-to-short ratio at Huobi fell from 1.07 to the current 1.00. In addition, OKX traders’ current 1.47 ratio is less than 1.58 eight days ago.
All data points to further disadvantage
From the perspective of the stats discussed above, there is hardly any sense that Ether price is going to turn bullish in the near term. The data suggests that professional traders are unwilling to add in long positions, as expressed in the base rate and long-to-short ratio.
In addition, the TVL data does not support a strong usage indicator of Ethereum smart contracts. Losing ground to competitors, while continuously delaying migration to a proof-of-stake solution, is likely to draw investor attention away and make tall investors feel uncomfortable.
The views and opinions expressed here are solely those of the writer and do not necessarily reflect the views of Coin-Crypto. Every investment and trading move involves risks. You should do your own research when making a decision.