The price of Ethereum fell 11.9% from November 20 to November 22, reaching its lowest level since July. Currently, investors may be concerned about crypto lending company Genesis after reports of difficulties raising money, which trigger rumors of insolvency on Nov. 21.
Although no immediate plans for bankruptcy have been made, Genesis continues to hold discussions with its creditors, indicating that the company may not be in a stable financial position.
There is unease about the centralization of decentralized finance (DeFi), after Uniswap Labs changed its privacy policy to reveal that it collects publicly-available blockchain data, users’ browser information, operating system data, and interactions with its service providers.
The hacker who stole $447 million from FTX exchange has been spotted moving their Ether funds, adding to the chaos. On November 20th, the attacker transferred 50,000 ETH to a separate wallet and then used two renBTC bridges to convert it to Bitcoin.
Since November 10, professional traders have been in a state of panic.
Retail traders typically avoid quarterly futures contracts due to the price difference from spot markets. However, professional traders prefer these contracts because they prevent the fluctuation of funding rates that often occurs in a perpetual futures contract.
The three-month futures annualized premium is the amount of money that is paid each year to cover the costs and risks associated with the future. In healthy markets, this amount should be between 4% and 8%. The chart above shows that derivatives traders have been bearish since Nov. 10. This is because the Ether futures premium was negative, which means that they expect the price of Ether to go down.
There is currently a situation where the contracts are in backwardation, which is atypical and usually seen as bearish. The metric did not improve after Ethereum rallied 5% on Nov. 22, reflecting professional traders’ unwillingness to take on additional risk by adding leveraged long (bull) positions.
Traders should also analyze Ether’s options markets to get a better understanding of the underlying asset.
Some people who trade stocks think that there might be more stock market crashes in the future.
The skew in the options market is a telling sign that market makers and arbitrage desks are overcharging for upside or downside protection.
In bear markets, options investors believe there is a greater chance of prices falling sharply, causing the skew indicator to rise above 10%. In bullish markets, the skew indicator falls below -10%, meaning that bearish put options are less expensive.
Since November 9, options traders have been less likely to offer protection against potential losses, as indicated by the delta skew remaining above the 10% threshold. The situation became worse over the following days as the delta skew indicator surged above 20%. This made it difficult for traders to manage their positions and caused many to close their positions at a loss.
The current 60-day delta skew stands at 23%, meaning that whales and market makers are pricing in higher odds of price dumps for Ether. Derivatives data shows that confidence is low right as Ether struggles to hold the $1,100 support. This suggests that Ether is at risk of further declines.
The data shows that people who are bullish on Ether (the cryptocurrency) should not give up yet, because these metrics tend to lag behind actual events. The panic that followed FTX’s bankruptcy and the subsequent liquidity issues at Genesis might dissipate quickly if exchanges public proof of reserves and institutional investors adding Bitcoin exposure during the dip are interpreted as positive by market participants.
Even though Ethereum prices have been rising lately, overall bears still have control according to ethereum derivatives metrics.
