ETH price is storming toward a key resistance level, but pro traders are reluctant to add leverage for three important reasons.

Even though Ether (ETH) price bounced over 20% from the $2,300 low on Feb. 22, derivatives data shows that investors are still cautious. To date, Ether's price is down 24% for the year, and key overhead resistances lay ahead.

Ethereum's most pressing issue has been high network transaction fees and investors are increasingly worried that this will remain an issue even after the network integrates its long-awaited upgrades.

For example, the 7-day network average transaction fee is still above $18, while the network value locked in smart contracts (TVL) decreased 25% to $111 billion between Jan. 1 and Feb. 27. This negative indicator could partially explain why Ether has been down-trending since early February.

Ether/USD price at FTX. Source: TradingView

The above channel currently shows resistance at $3,100, while the daily closing price support stands at $2,500. Therefore, a 14% rally from the current $2,750 level needs to happen for the prevailing downward trend to be canceled.

Derivatives markets show fear as the prevailing sentiment

The 25% delta skew compares equivalent call (buy) and put (sell) options. The indicator will turn positive when "fear" is prevalent because the protective put options premium is higher than the call options.

The opposite holds when market makers are bullish, causing the 25% delta skew to shift to the negative area. Readings between negative 8% and positive 8% are usually deemed neutral.

Deribit Ether 30-day options 25% delta skew. Source: laevitas.ch

The above chart shows that Ether option traders have been signaling bearishness since Feb. 11, just as Ether failed to break the $3,200 resistance. Furthermore, the current 8.5% reading shows no confidence from market markers and whales despite the 7.5% price increase on Feb. 28.

Exchange-provided data highlights traders' long-to-short net positioning. By analyzing every client's position on the spot, perpetual and futures contracts, one can better understand whether professional traders are leaning bullish or bearish.

There are occasional methodological discrepancies between different exchanges, so viewers should monitor changes instead of absolute figures.

Exchanges' top traders Ether long-to-short ratio. Source: Coinglass

Even with Ether's 21.5% rally since Feb. 24, top traders on Binance, Huobi and OKX have decreased their leverage longs. More precisely, Huobi was the only exchange facing a modest reduction in the top traders' long-to-short ratio as the indicator moved from 1.04 to 1.07.

However, this impact was more than compensated by OKX traders increasing their bullish bets from 2.15 to 1.58 from Feb. 24 to Feb. 28. On average, top traders decreased their longs by 8% over the past four days.

Top traders could be caught by surprise

From the perspective of the metrics discussed above, there is hardly a sense of bullishness present in the Ether market. Moreover, data suggests that pro traders are unwilling to add long positions as expressed by both futures and options markets.

Of course, even professional traders get it wrong, and a short cover should happen if Ether breaks the current downtrend channel $3,100 resistance. Still, it's also important to at least recognize that there's little interest in buying using derivatives at the current level.

Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.

Cryptos feed Join Telegram

Recommended content


Recommended Content

Editors’ Picks

Bitcoin Price Prediction: BTC traders in dire need of a realistic price target

Bitcoin Price Prediction: BTC traders in dire need of a realistic price target

Bitcoin (BTC) price has advanced substantially in the first weeks of the year as global markets kept deaf, dumb and blind to the warnings of the central bankers that with the new year, all problems for 2023 will be suddenly erased. Inflation will remain a big topic for 2023, as central bankers might be right that inflation is nowhere near where it needs to be.

More Bitcoin News

Ripple Price Prediction: XRP guaranteed for fourth weekly positive close, but profit target is too far

Ripple Price Prediction: XRP guaranteed for fourth weekly positive close, but profit target is too far

Ripple (XRP) price is set to gain ground above the 200-day Simple Moving Average (SMA) in a repetition pattern as seen last week and the week before, where bulls were able to each time consolidate above a key pivotal or technical level.

More Ripple News

Apecoin Price Prediction: APE bulls are nearing a difficult hurdle that might be too high to jump

Apecoin Price Prediction: APE bulls are nearing a difficult hurdle that might be too high to jump

Apecoin (APE) price is having one of its best weeks for the year as bulls are pushing price action firmly higher. The risk is that with the several central banks coming out next week, some hawkish comments could trigger a massive headwind.

More Apecoin News

Hedera Price Prediction: HBAR missed the opportunity to reach that target before the fade kicked in

Hedera Price Prediction: HBAR missed the opportunity to reach that target before the fade kicked in

Hedera (HBAR) price has been shooting for the starts but looks to be dropping like a stone now. Just like Icarus, who flew too close to the sun, this time, Hedera came just not close enough to the projected price target for this rally.

More Hedera News

Bitcoin: If bulls are back, this is where you can accumulate BTC next

Bitcoin: If bulls are back, this is where you can accumulate BTC next

Bitcoin price shows a lack of momentum after an explosive move in the last three weeks. The fourth week has been relatively silent, without a lot of volatile moves. While BTC consolidates, other altcoins are rallying left and right, providing massive gains.

Read full analysis

BTC

ETH

XRP