Ether (ETH) has been trading below $3,750 for the past three days, despite the upcoming launch of the coin’s spot exchange-traded funds (ETFs) in the United States. Some believe that the lack of bullish momentum for ETH is due to uncertainty surrounding how long it will take for individual S-1 fund filings to be approved by regulators. As a result, optimism among Ether investors, as measured by derivatives metrics, has reached a 3-week low.
Regulatory uncertainty weighs on ETH price
Even if the U.S. Securities and Exchange Commission (SEC) approves the filings from BlackRock, Fidelity, VanEck, and other firms this week, investors are concerned that the current market conditions may not be conducive to demand for Ethereum ETFs. The hesitation towards cryptocurrencies stems from regulatory ambiguity, as well as apprehension about the real estate market’s instability.
Coinbase, Binance, and Kraken are currently facing legal challenges for allegedly failing to register as brokers while offering securities investments. Additionally, the U.S. SEC and the U.S. Department of Justice have taken action against crypto companies that incorporate privacy tools like Samourai Wallet and Tornado Cash. Regulators also suggest that Ether staking services could be classified as securities, as they involve a promise of returns in exchange for the efforts of others.
Even in the absence of immediate regulatory developments in the crypto space, investors are hesitant to hold assets perceived as riskier during a potential economic downturn. Moody’s Ratings warned on June 6 that at least six U.S. regional banks are at risk of credit rating downgrades due to significant exposure to commercial real estate, which is under strain due to rising interest rates.
The New York Times highlighted on May 24 the challenges in the Chinese property market, where millions of empty apartments remain unsold. Despite government incentives to stimulate purchases using state-backed loans, housing prices continue to plummet, leading to concerns about developers on the verge of default and their interconnectedness with local banks and the financial system.
The less favorable macroeconomic conditions explain why Bitcoin (BTC) failed to surpass $71,000 on June 7, dampening expectations for potential inflows into a spot Ethereum ETF. This negative sentiment is reflected in ETH futures and options metrics, which have reached their most pessimistic levels in over three weeks.
Diminished confidence in Ether derivatives markets
Professional traders favor monthly contracts due to the absence of a funding rate. In stable markets, these instruments typically trade at a premium of 5% to 10% to accommodate their longer settlement period.
Data indicates that the ETH futures premium decreased to 13% on June 10, down from 15% on June 6. While not indicative of a bearish trend, this is the lowest level seen in over three weeks. This is unexpected given some analysts’ claims that Ethereum ETFs could attract up to 20% of Bitcoin’s inflows into similar products.
Ethereum leaders are facing a ‘massive contradiction’ according to Wintermute CEO
Traders should also monitor options markets to gauge investor sentiment. A rise in the 2-month delta skew above 8% suggests expectations of an Ether price decline, while periods of excitement typically result in a negative 8% skew.
The ETH options 25% delta skew reached a bullish level on May 29, but the current -6% level indicates a fairly neutral and balanced outlook. This suggests that whales and market makers are currently assigning similar probabilities to positive and negative price movements for Ether.
Despite the potential launch of a spot Ethereum ETF in the U.S., the less bullish signals from Ether futures and options markets suggest that the ETH price is unlikely to exceed $4,000 in the near future.
This article is for informational purposes only and should not be construed as legal or investment advice. The opinions expressed are solely those of the author and do not necessarily reflect the views of Cointelegraph.