On November 9, Ethereum (ETH) witnessed a surprising 8% upswing, breaking through the $2,000 resistance and reaching its highest price point in six months.
This abrupt surge was prompted by reports of BlackRock registering the iShares Ethereum Trust in Delaware, leading to approximately $48 million in liquidations in ETH short futures. The initial disclosure came from @SummersThings on a social network and was subsequently validated by Bloomberg ETF analysts.
The announcement sparked positive anticipation regarding a potential filing for an Ether spot ETF by BlackRock, a colossal $9 trillion asset manager. This speculation follows BlackRock’s registration of the iShares Bitcoin Trust in Delaware in June 2023, just a week before their initial application for a spot Bitcoin ETF.
However, the absence of an official statement from BlackRock suggests that investors might have preempted developments. Nevertheless, the considerable influence of this asset manager in traditional finance places those skeptical about Ether’s success in a precarious position.
Ethereum Derivatives Gain Favor with Professional Traders Making Bullish Bets
To gauge the positioning of professional traders following the unexpected rally, one should delve into the metrics of ETH derivatives. Typically, Ether monthly futures exhibit a 5%–10% annualized premium compared to spot markets, indicating that sellers require additional compensation to defer settlement.
The Ether futures premium, surging to 9.5% on Nov. 9, marked its highest level in over a year, surpassing the 5% neutral threshold set on Oct. 31. This shift concluded a two-month bearish phase characterized by low demand for leveraged long positions.
To determine if the breach above $2,000 has generated excessive optimism, scrutiny of the Ether options markets is necessary. In instances where traders anticipate a decline in Bitcoin’s price, the delta 25% skew typically rises above 7%, while periods of enthusiasm usually witness it dipping below negative 7%.
The Ether options 25% delta skew transitioned from neutral to bullish on Oct. 31, and the current -13% skew is the lowest in over 12 months, yet it doesn’t signify undue optimism. This healthy level has persisted for the past nine days, indicating that Ether investors were anticipating a bullish trend.
Despite the ongoing narrative surrounding the spot ETF, Ether bulls evidently gained the upper hand, with ETH experiencing a 24% rally between Oct. 18 and Nov. 8, predating the BlackRock news. This price movement reflects heightened demand for the Ethereum network, as evidenced by the robust 30-day volumes of the top decentralized applications (DApps).
However, when scrutinizing the broader cryptocurrency market structure, particularly the retail indicators, there appears to be some incongruity between the escalating optimism and the demand for leverage using Ether derivatives.
ETH and Cryptocurrency Demand on the Rise Based on Retail Indicators
To begin, Google searches for terms such as “Buy Ethereum,” “Buy ETH,” and “Buy Bitcoin” have shown no significant changes over the past week.
While it is a common belief that retail traders tend to join bull markets a few days or weeks after major price milestones and six-month highs have been reached, the demand for cryptocurrencies has been on the decline. This is evident when using the stablecoin premium as a metric for assessing the activity of Chinese crypto retail traders.
The stablecoin premium measures the variance between China-based peer-to-peer USD Tether (USDT) trades and the United States dollar. In periods of excessive buying demand, this indicator typically rises above fair value at 100%. Conversely, during bearish markets, Tether’s market offer may flood, leading to a discount of 2% or more.
As of now, the Tether premium on OKX is at 100.9%, indicating a balanced demand from retail investors. This contrasts with the 102% recorded on Oct. 13, for example, just before the total crypto market capitalization surged by 30.6% until Nov. 9.
This suggests that Chinese investors have not shown an excessive demand for converting fiat to crypto using stablecoins.
In summary, the surge in Ether’s value above $2,000 appears to be fueled by derivatives markets and the anticipation of spot ETF approval. The current lack of retail demand does not necessarily signal an impending correction.
However, concerns arise due to the excitement surrounding BlackRock’s Ethereum Trust registry and the presence of excessive leverage longs in ETH derivatives, potentially challenging the $2,000 support level.
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