Ether (ETH) traded in a narrow 6% range between $3,370 and $3,560 last week. It is worth noting that the last time ETH closed above $3,600 was on June 17, which means that it may have missed a major opportunity, the spot listing of the U.S.-listed Ethereum Exchange-traded Fund (ETF) on July 23, which has been anticipated for over three years.
Given that Bitcoin (BTC) is trading just 10% below its all-time high, you can’t blame the cryptocurrency for its lack of momentum. More importantly, US-listed spot Bitcoin ETFs have seen net inflows of $961 million over the past two trading days. The lack of anticipation for Ether is evident in the ETH derivatives indicator. But does this mean traders are betting on a price decline?
Ethereum ETF Flows and Mt. Gox Bitcoin Transfer Uncertainty
Analysts were bullish on the net inflows into the spot Ethereum ETF, but there were concerns about potential outflows from the Grayscale Ethereum Trust (ETHE), which was converted from a trust fund that previously did not allow investors to cash out. Grayscale’s decision to maintain an ETHE fee of 2.5%, much higher than its competitors, also contributed to the movement.
Crypto market maker Wintermute wrote in a July 21 research report that it expects an Ethereum spot ETF to generate up to $4 billion in inflows in its first 12 months of trading. Others, such as ASXN Crypto Asset Manager, were more optimistic, predicting $4 billion in net inflows within five months. The firm added that outflows would eventually ease once Grayscale’s mini Ether ETF with a fee of 0.15% is launched.
Regardless of the initial demand for an integrated Spot Ethereum ETF, crypto investors are somewhat concerned after the Mt. Gox exchange moved 47,500 Bitcoins worth $3.2 billion on July 23. The bankruptcy filing, announced on July 5, outlines a plan to pay creditors. The uncertainty comes as it is unclear how many of the 140,000 BTC held by Mt. Gox addresses will be sold on the market.
Essentially, ETH bulls are hesitant to add positions ahead of the synthetic spot ETF net flow data, at least for the first few days, due to fears of a potential market selloff driven by Bitcoin, which has been locked in for over a decade. These concerns explain why ETH prices have failed to break $3,600 for the past five weeks. But does this justify the lack of optimism among investors, according to ETH derivatives?
Ether derivatives may look shaky, but there is a glimmer of hope.
The options market provides insight into the dynamics ahead of spot ETF expectations. If the market is bullish, a -7% delta skew is typically seen, as put (sell) options become cheaper than equivalent call (buy) options. Conversely, a skew indicator of 7% or more typically indicates fear of an imminent price correction.
According to the data, Ethereum options skew has failed to fall below the neutral -7% threshold over the past few weeks. This is especially notable given the 21% increase in ETH prices between July 7 and July 21, indicating a lack of confidence despite Bloomberg analysts’ high confidence in the imminent launch of a spot Ethereum ETF.
Traders should also consider the ETH monthly futures market to gauge investor sentiment. In a neutral market, these contracts typically trade at an annual premium (base rate) of 5% to 10% over the regular spot ETH market to compensate for the long settlement period.
Related: Nansen Launches Industry-First Ether ETF Analysis Dashboard
The ETH futures premium crossed the 10% neutral threshold last week, indicating moderate optimism. For comparison, this indicator surged to 25% in mid-March after Ether’s price rose 77% in less than five weeks. Therefore, it would be wrong to say that Ether investors are bearish. Furthermore, the lack of confidence indicates a potential price rally if spot Ethereum net inflows are confirmed.
This article does not contain any investment advice or recommendations. All investment and trading moves involve risk, and readers should conduct their own research when making decisions.