Ethereum (ETH) has been trading below $3,750 for the past three days, despite the impending launch of the coin’s spot exchange-traded fund (ETF) in the United States. Some argue that the lack of bullish momentum for ETH is due to a lack of clarity on how long it may take for individual S-1 funds to receive approval from regulators. Nonetheless, the bullishness of Ethereum investors according to derivatives indicators has pushed the stock to a three-week low.
Regulatory uncertainty pressures on ETH price
But even if the U.S. Securities and Exchange Commission (SEC) approves the respective filings of BlackRock, Fidelity, VanEck and other companies this week, investors fear that current market conditions are not favoring demand for Ethereum ETFs. One of the reasons for the lack of enthusiasm for cryptocurrencies is regulatory uncertainty, but there are also concerns from a macroeconomic perspective, with the real estate market showing signs of further stress.
Coinbase, Binance, and Kraken are facing court action for allegedly failing to register as brokers while offering securities investments. The U.S. SEC and U.S. Department of Justice have also prosecuted cryptocurrency companies that include privacy tools such as Samourai Wallet and Tornado Cash. Moreover, regulators argue that Ethereum staking service brokerages can be considered securities, given that they promise returns in return for the work of others.
Even assuming there are no imminent events on the cryptocurrency regulatory front, investors are uncomfortable holding assets deemed riskier during a potential recession. Moody’s said on the 6th (local time) that at least six regional U.S. banks are at risk of having their debt ratings downgraded due to their “focus on commercial real estate,” which is suffering from rising interest rates.
The New York Times published an article on China’s housing market on May 24, stating that nearly 4 million apartments are left empty with no intention of purchasing them. The article points out that government incentives to buy property using government-backed loans have not prevented housing prices from collapsing, and highlights that developers are “still on the brink of default.” “It is intricately interconnected with local banking and financial systems.”
Not-so-favorable macroeconomic conditions explain why Bitcoin (BTC) failed to break the $71,000 mark on June 7, reducing Ethereum investors’ expectations of potential spot Ethereum ETF inflows. The worsening sentiment is evident in the ETH futures and options indicator, which has moved to its most pessimistic point in more than three weeks.
Reduced confidence in the Ethereum derivatives market
Professional traders prefer monthly contracts because there are no funding rates. In neutral markets, these instruments trade at a premium of 5-10%, taking into account the extended settlement period.
Data shows that ETH futures premiums fell from 15% on June 6 to 13% on June 10. Although far from a bearish structure, this is the lowest level in more than three weeks. This is certainly not what one might expect, considering that some analysts claim that Ethereum ETFs could capture up to 20% of the Bitcoin inflows to similar products.
Related: Ethereum leaders are trapped in a ‘staggering contradiction’ — Wintermute CEO
Traders should also analyze the options market to determine whether investors are becoming less optimistic. When investors expect Ether prices to fall, the two-month delta skew metric rises above 8%, with periods of excitement tending to result in negative 8% skewness.
ETH options 25% delta skew was last seen at a bullish level on May 29th, but the latest -6% level is fairly neutral and balanced. This means that whales and market makers are setting similar odds of positive and negative price movements for the current Ether price. .
Given that Ethereum futures and options are sending bullish signals despite the possibility of an Ethereum ETF trading in the US, it is unlikely that the price of ETH will exceed $4,000 in the near term.
This article is written for general information purposes and should not be considered legal or investment advice. The views, thoughts and opinions expressed herein are those of the author alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.