Ether’s prospects for a rebound in price are contingent upon improvements in economic indicators from the US, as traders exercise caution following significant liquidations and fluctuations in derivatives markets.

Key takeaways:

• The premium on ETH futures indicates that traders are remaining cautious, avoiding excessive leverage despite the recovery of banking stocks amid recent credit worries.
• Activity among Ether whales around the $3,700 mark implies a lack of strong bearish sentiment, although confidence in achieving a rapid rebound to $4,500 is limited.

Ether (ETH) saw a decrease of 9.5% on Friday, testing the $3,700 threshold and instigating $232 million in leveraged long liquidations within a span of 48 hours. This unforeseen correction occurred in the midst of a broader risk-averse strategy triggered by credit concerns following write-offs by two US regional banks on bad loans.

Trade Data Insights: Data regarding Ether derivatives indicates some anxiety among bullish traders; however, whale activity suggests that many expect neither a substantial downturn nor a swift recovery. A primary concern now is whether the $3,700 support will endure as economic risks escalate.

ETH 30-day options delta skew (put-call) at Deribit. Source: laevitas.ch

Additionally, the 25-delta skew for Ether options surged to 14% on Thursday, a figure rarely maintained and typically associated with periods of pronounced fear, indicating that traders are paying a premium for put (sell) options as apprehensions about downside risks persist.

The S&P Regional Banks Select Industry Index partially regained losses from Thursday, trading 1.5% higher on Friday. Nonetheless, prevailing credit concerns have affected major financial entities like JP Morgan (JPM) and Jefferies Financial Group (JEF), both reporting losses connected to the automotive sector. According to Yahoo Finance, auto lending has been the fastest-growing segment among US banks.

Joachim Nagel, the President of Germany’s Bundesbank and a member of the ECB governing council, voiced concerns about possible “spillovers” from the private credit markets, categorizing it as a “regulatory risk.” He shared these concerns on CNBC, underscoring the urgency for regulators to scrutinize the situation as the global private credit market surpasses $1 trillion.

ETH 30-day futures annualized premium. Source: laevitas.ch

The ETH monthly futures premium relative to spot markets dipped to 4%, falling below the 5% neutral threshold. Trader sentiment had already been shaken following the recent flash crash on Oct. 10, and the last notable bullish surge occurred in early February. Increasingly, Ether traders appear skeptical regarding the durability of any bullish traction.

Escalating US-China Trade Conflicts Affect Market Sentiment

Concerns among traders are fueled by the strained relations between the US and China, as the ongoing trade war evolves into a new level with export limits on rare earth materials and sanctions against a South Korean shipping enterprise. US President Donald Trump stated on Oct. 10 that the US is contemplating an additional 100% tariff on Chinese products starting Nov. 1.

To ascertain whether Ether whales are genuinely anticipating further decline or merely hedging against worsening economic conditions, it is pertinent to analyze the positioning of top traders on derivatives exchanges. This metric consolidates futures, margin, and spot market data, providing clearer insights into short-term market sentiment.

Top traders at Binance reduced their long positions from Tuesday to Thursday, subsequently reversing and boosting their Ethereum exposure in spite of the ongoing price decline. Conversely, traders at OKX sought to time the market by increasing their positions near the $3,900 mark but eventually withdrew as prices plummeted to $3,700 on Friday.

Despite the current volatility, ETH derivatives markets display no alarming indicators. The reluctance of bulls to engage in leveraged trading seems healthy, particularly following the extreme volatility witnessed on Oct. 10. However, Ether’s path to $4,500 will likely depend on clearer indications from credit conditions and labor market data in the US, suggesting that any recovery may take time.

This article is for informational purposes only and should not be considered legal or investment advice.