Important points:
-
ETH futures premiums indicate that traders remain cautious and avoid heavy leverage even as bank stocks recover from the recent credit scare.
-
Ether whale activity near $3,700 suggests limited bearish conviction, but confidence in a quick recovery towards $4,500 remains subdued.
Ethereum (ETH) fell 9.5% on Friday, retesting the $3,700 level and triggering $232 million in leveraged long liquidations in less than 48 hours. The unexpected adjustment comes amid widespread risk-off moves amid credit concerns after two regional U.S. banks announced they would write off non-performing loans.
Ether derivatives data shows moderate anxiety among bullish traders, but whale positions suggest that most do not expect further declines. The key question now is whether the support at $3,700 will hold as macroeconomic risks increase.
Ether options’ 25 delta skew jumped to 14% on Thursday, but this level is rarely sustained and is often associated with rising fear. Traders are paying a premium for put options, indicating market makers remain concerned about downside risk. Under normal market conditions, skew typically varies between -6% and +6%.
The S&P Regional Bank Select Sector Index recovered some of Thursday’s losses, trading 1.5% higher on Friday. But credit concerns have left a mark on major financial institutions such as JPMorgan (JPM) and Jefferies Financial Group (JEF), both of which reported losses related to the auto sector. According to Yahoo Finance, auto financing is the fastest growing banking sector in the United States.
Joachim Nagel, president of the Bundesbank and member of the ECB’s executive board, warned of possible “spillover” from private credit markets, calling it a “regulatory risk.” Nagel told CNBC he shared his concerns that the global private credit market has surpassed $1 trillion, adding: “As regulators, we need to look at this carefully.”
ETH’s monthly futures premium compared to the spot market fell to 4%, below the neutral benchmark of 5%. Trader sentiment had already been shaken by the October 10th flash crash, and the last notable bullish phase was in early February. Ether traders appear to be increasingly doubting the strength of the sustained bullish momentum.
US-China trade tensions deepen, but ETH whales are not bearish
Traders’ concerns are partly due to deteriorating relations between the United States and China, as the ongoing trade war enters a new phase with restrictions on rare earth exports and sanctions on South Korean shipping companies. US President Donald Trump said on October 10th that the US may impose additional tariffs of 100% on Chinese products starting November 1st.
To determine whether Ether Whale is truly betting on further decline or simply hedging amidst worsening macroeconomic conditions, it is instructive to examine the positioning of top traders on derivatives exchanges. This indicator combines data from the futures, margin, and spot markets to give you a clearer picture of short-term sentiment.
Binance’s top traders reduced their bullish bets (longs) from Tuesday to Thursday, but then reversed course and increased their exposure to ETH despite the continued price decline. In contrast, OKX’s top traders tried to time the market by adding exposure around the $3,900 level, but ultimately withdrew as the price fell to $3,700 on Friday.
Related: How to catch altcoin market manipulation before it crashes
There are no alarming signs in the ETH derivatives market, rather the opposite. The bulls’ reluctance to take leveraged positions appears to be healthy, especially after the extreme volatility on October 10th. However, Ether’s path towards $4,500 will likely depend on clearer signals from credit conditions and US labor market data, meaning any recovery could take time.
This article is for general informational purposes only and is not intended to be, and should not be taken as, legal or investment advice. The views, ideas, and opinions expressed herein are those of the author alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.