Business

⁠Ethereum enthusiasts are forecasting a price of $ 5,000 per ETH, and this time derivatives data is on their side

Proponents of Ether (ETH) have been saying that the price of $ 5,000 is “on schedule”, since 2018 and some go further by saying that the price will hit $ 20,000 in the long term.

A part of these bullish predictions are based on the bet of ETH 2.0 and the reduction in supply resulting from EIP-1559.

The $ 20,000 estimate equates to a market capitalization of $ 2.36 trillion, and while feasible, it still seems overly optimistic today.

Ether entered an ascending channel on September 20, which points to $ 5,000 turning into a support level in late November.

Price of Ether in USD (Kraken). Source: TradingView

Supporting the recent strength is the growth of total locked value, or adjusted TVL, in smart contracts on the Ethereum network. The TVL measures the assets deposited in decentralized applications and is usually led by lending protocols and DEXs.

Adjusted Total Blocked Value (TVL) of the Ethereum network in USD. Source: DeBank.com

Ether’s TVL surpassed its previous all-time high of $ 71 billion on October 16, accumulating a 50% gain in three months through October 31.

Regular headwinds from US lawmakers could be driving investors away from cryptocurrencies. Many states in the United States, such as Kentucky, Texas, Alabama, Vermont, New Jersey, and more recently New York, have cracked down on cryptocurrency lending.

Additionally, in October, the New York-based decentralized prediction market Polymarket was investigated by the US Commodity Futures Trading Commission (CFTC). According to a Bloomberg story on October 23, the agency is evaluating whether the decentralized finance (DeFi) app allows its clients to trade binary options and swaps without the necessary approval from the regulator.

On the other hand, some investors expect a positive move from traditional markets to further fuel the rally. The Data shows that November has been the best performing month for the S&P 500 since 1985.

Professional traders believe that the price of ETH will rise

To confirm investors’ confidence that the $ 5,000 prophecy will be fulfilled, the monthly contract premium, known as the “base,” must be monitored. Unlike the perpetual contract, these fixed-date futures do not have a finance rate, so they will be priced very differently from the regular spot market.

By evaluating the price difference between futures and the regular spot market, a trader can gauge the level of optimism in the market. Provided there is excessive optimism from buyers, the three-month futures contract will trade at an annualized (base) premium of 15% or more.

Base rate for 3-month Ether futures. Source: Laevitas.ch

Note that even the 9.5% correction in the ETH price on October 27, from $ 4,300 to $ 3,900, was not enough to affect traders’ enthusiasm. Currently, the base rate stands at 17%, indicating moderate optimism.

Options markets show a moderate upward trend

Ether hit an all-time high of $ 4,460 on October 29 and to determine how optimistic traders are we have to look at the 25% slope of the options delta. This indicator provides a reliable analysis ofl “fear and greed” comparing similar call and put options.

The metric will turn positive when the premium for neutral-to-bearish put options is higher than that of similar-risk call options. This situation is often considered a “scary” scenario. On the other hand, a negative delta translates into a higher upward protection cost and points to an upward trend.

25% tilt of the 60-day Ether options delta (Deribit). Source: Laevitas.ch

The chart above shows the indicator at -9, flirting with the momentum of “greed”. That bullish stance started on October 18, which wasn’t exactly a positive day for Ether because it tested the $ 3,700 support multiple times.

Both derivatives indicators are on the edge of a neutral to bullish zone, which should be interpreted as very positive, as it leaves room for buyers to leverage through derivative instruments.

Based on the futures and options metrics, the ultra bulls asking for a price of $ 5,000 this time are likely correct.

The views and opinions expressed here are solely those of the Author and do not necessarily reflect the views of Cointelegraph.com. Each investment and commercial movement involves risks, you must do your own research when making a decision.

Keep reading:

Source link

HELEN HERNANDEZ

Helen Hernandez is our best writer. Helen writes about social news and celebrity gossip. She loves watching movies since childhood. Email: Helen@oicanadian.com Phone : +1 281-333-2229

Related Articles

Leave a Reply

Your email address will not be published. Required fields are marked *

Back to top button

Adblock Detected

Please consider supporting us by disabling your ad blocker