ETH price is finding support at $1,560 and multiple data points are beginning to hint at a possible rally to $1,800 before the end of February.
Ether has been struggling with the $1,680 resistance since Jan. 20. Still, the ascending triangle pattern and improvements in investor sentiment in ETH derivatives provides hope that Ether price could reach $1,800 or higher by the end of February. This, of course, depends on how the Ether price behaves as it reaches the pattern deadline by mid-February.
Ether/USD price index, 12-hour. Source: TradingView
From one side, traders are relieved that Ether is trading up 33% year-to-date, but the repeated failures to break the $1,680 resistance coupled with negative newsflow might give bears the power to cancel the bullish triangle pattern.
According to a Jan. 30 report from Axios, New York State's Department of Financial Services is reportedly investigating cryptocurrency exchange Gemini over claims that the firm made regarding assets in its Earn lending program. The suspicions followed reports that multiple Gemini Earn users believed their assets had been protected by the Federal Deposit Insurance Corporation (FDIC).
On Jan. 12, the U.S. Securities and Exchange Commission charged the Gemini exchange with offering unregistered securities through Earn. In addition, Gemini co-founder Cameron Winklevoss has claimed that Genesis and DCG owe $900 million to Gemini's clients.
Several United States senators have reportedly penned a letter requesting answers from Silvergate Bank, according to a Jan. 31 Bloomberg report. The policymakers were not fully satisfied with the bank's previous answers about its alleged role in handling FTX user funds. Silvergate reportedly cited restrictions on disclosing "confidential supervisory information."
On the bright side, Ethereum Foundation developer Parithosh Jayanthi announced that the "Zhejiang" public testnet will be launched on Feb. 1. The implementation will allow staked Ether withdrawal on a test environment so that validators can anticipate the proposed changes for the Shanghai hard fork.
Let's look at Ether derivatives data to understand if pro traders are frustrated by the recent price rejection at the $1,680 level.
ETH’s futures premium has failed to enter the FOMO area
Retail traders usually avoid quarterly futures due to their price difference from spot markets. Meanwhile, professional traders prefer these instruments because they prevent the fluctuation of funding rates in a perpetual futures contract.
The annualized two-month futures premium should trade between 4% and 8% in healthy markets to cover costs and associated risks. When the futures trade at a discount versus regular spot markets, it shows a lack of confidence from leverage buyers, which is a bearish indicator.
Ether 2-month futures annualized premium. Source: Laevitas.ch
The above chart shows that traders using future contracts have failed to enter the neutral-to-bullish 4% threshold. Still, the current 3.5% premium denotes a moderate sentiment improvement compared to two weeks prior, but that does not mean traders expect an immediate positive price action.
For this reason, traders should analyze Ether's options markets to understand how whales and market makers are pricing the odds of future price movements.
Options traders are comfortable with downside risk
The 25% delta skew is a telling sign when market makers and arbitrage desks are overcharging for upside or downside protection.
In bear markets, options investors give higher odds for a price dump, causing the skew indicator to rise above 10%. On the other hand, bullish markets tend to drive the skew indicator below -10%, meaning the bearish put options are discounted.
Ether 60-day options 25% delta skew: Source: Laevitas.ch
The delta skew has stabilized near 0% in the last two weeks, signaling that Ether options traders held a neutral sentiment. That is particularly intriguing since ETH gained 10% on Jan. 20 — indicating pro traders are pricing similar upside and downside risks.
Ultimately, both options and futures markets point to whales and market makers not comfortable with adding leverage longs, but at the same time, not worried if the $1,570 ascending channel support breaks.
Traders will watch to see if Ether bulls are able to keep the price within the bullish triangle formation for the next two weeks, but if the macroeconomic environment allows, ETH derivatives point to a potential rally toward $1,800.
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