Key takeaways:
The premium on ETH futures indicates that traders remain cautious, steering clear of substantial leverage even as banking stocks recover from recent credit worries.
Whale activity around the $3,700 mark reflects limited bearish sentiment, while confidence in a quick bounce back towards $4,500 remains muted.
Ether (ETH) dropped by 9.5% on Friday, testing the $3,700 level and resulting in $232 million in leveraged long liquidations within 48 hours. This unexpected decline coincided with a broader risk-off trend driven by credit concerns following write-offs from two US regional banks on bad loans.
Data on Ether derivatives suggests moderate anxiety among bullish traders, but whale positioning indicates most do not anticipate a significant further decline. The pressing question is whether the $3,700 support will hold as macroeconomic uncertainties escalate.
The 25-delta skew for Ether options jumped to 14% on Thursday, a level rarely maintained and often associated with periods of increased fear. Traders are paying extra for put (sell) options, indicating that market makers are wary of downside risks. Typically, the skew fluctuates between -6% and +6% under normal conditions.
The S&P Regional Banks Select Industry Index recovered some of Thursday’s losses, rising 1.5% on Friday. Nonetheless, credit concerns continue to impact larger financial firms like JP Morgan (JPM) and Jefferies Financial Group (JEF), both of which reported losses related to the automotive sector. According to Yahoo Finance, auto lending has seen the fastest growth among US banking segments.
Joachim Nagel, president of Germany’s Bundesbank and a member of the ECB’s governing council, cautioned about potential “spillovers” from the private credit market, labeling it a “regulatory risk.” Nagel expressed his concerns to CNBC, highlighting that the global private credit market has surpassed $1 trillion, stressing the need for regulatory scrutiny.
The ETH monthly futures premium compared to spot markets decreased to 4%, falling below the neutral threshold of 5%. Traders’ sentiments were already rattled by the flash crash on October 10, and the last notable bullish phase occurred in early February. Ether traders seem increasingly skeptical about the sustainability of any bullish momentum.
US-China trade tensions deepen, but ETH whales are not bearish
Some traders’ unease stems from the deteriorating US-China relationship as the ongoing trade war escalates with new export controls on rare earths and sanctions against a South Korean shipping firm. On October 10, US President Donald Trump mentioned that the US might impose an additional 100% tariff on Chinese goods starting November 1.
To ascertain whether Ether whales are genuinely betting on further downside or merely hedging amid worsening macroeconomic conditions, examining the positioning of top traders on derivatives exchanges is invaluable. This metric amalgamates data from futures, margin, and spot markets, presenting a clearer picture of short-term sentiment.
Top traders at Binance decreased their bullish positions (longs) from Tuesday to Thursday but then reversed their stance, increasing their ETH exposure despite persistent price weakness. Conversely, top traders at OKX attempted to time the market by adding exposure near the $3,900 level but ultimately exited as prices dipped to $3,700 on Friday.
Related: How to catch market manipulation in altcoins before they crash
ETH derivatives markets show no alarming signs; rather, the reluctance of bulls to take on leveraged positions seems healthy, especially following the extreme volatility on October 10. However, Ether’s journey towards $4,500 will likely hinge on clearer indications from credit conditions and US labor market data, suggesting that any recovery could take time.
This article is for general informational purposes and is not intended to be and should not be considered legal or investment advice. The views, thoughts, and opinions expressed here belong solely to the author and do not necessarily reflect or represent the views and opinions of Cointelegraph.
