Ether (ETH) has been experiencing a consistent upward trend over the past 10 days, with gains of 21.5% and approaching the $2,800 mark. The surge in cryptocurrency prices can be attributed to the success of the newly launched Bitcoin (BTC) exchange-traded fund (ETF) in the United States. However, Ether has its own factors that could potentially push its price above $3,000, a level that has proven challenging in the past. Will Ether’s journey to $3,000 be different this time?
From an optimistic standpoint, Ether has the potential to solidify its position as the second cryptocurrency to have a spot ETF listed on US exchanges. This would set it apart from competitors like Solana (SOL) and BNB Chain (BNB) in terms of accessibility and regulation. Exchanges such as Binance and Coinbase are currently facing legal action from the US Securities and Exchange Commission (SEC) regarding their security offerings. Therefore, the approval of an Ethereum ETF in the US would significantly reduce uncertainty for investors.
There are other positive factors that could drive Ether’s price higher, including the upcoming Dencun network upgrade on March 13. This upgrade aims to lower transaction costs on the Ethereum layer 2 by offering more block space and reducing gas costs for rollups. These changes could potentially increase the usage of decentralized applications (DApps) and lead to more deposits in smart contracts, creating a higher demand for ETH.
While Ether bulls have several reasons to believe that $3,000 is attainable, historical data shows that sustaining such a price level is challenging. For example, in the three weeks leading up to April 3, 2022, ETH experienced a 42% gain, rising from $2,520 to $3,580. However, the rally proved to be unsustainable as the price plummeted by 46% in the following 40 days. Traders are now questioning whether Ether could face a similar outcome this time around.
To gain further insight, one should analyze Ether’s futures premium, which indicates the demand for leverage between longs (buyers) and shorts (sellers). Professional traders typically prefer monthly futures contracts due to their extended settlement period, but these contracts tend to trade at a 5% to 10% premium to compensate. Data shows that the ETH futures premium surpassed the 10% neutral threshold on February 10 and currently stands near 15%. This indicates that bulls are seeking additional leverage as ETH has risen from $2,300 to its current level of $2,800. In contrast, the annualized premium in early April 2022 was at 5.5%, which is considered neutral.
Another metric to consider is the options market, which can provide insights into how professional traders are positioned. The 25% delta skew is used as a proxy to gauge market sentiment. If traders anticipate a drop in Ether’s price, the skew metric will rise above 7%, while periods of optimism typically have a -7% skew. Currently, the delta skew metric is near its lowest level in three months, suggesting a moderate level of optimism among traders.
Traders who are banking on a price increase based on the likelihood of the Ethereum spot ETF approval may face disappointment, especially if they are using leverage. Even though senior Bloomberg ETF analysts estimate the approval odds to be around 70%, the SEC’s final deadline is May 23. This means that there is a significant risk of liquidation due to price volatility, even if ETH surpasses $3,000 before the event. However, Ether derivative metrics indicate a different scenario compared to April 2022, so there is no certainty for ETH bulls.
Please note that this article does not provide investment advice or recommendations. All investment and trading decisions involve risk, and readers should conduct their own research before making any decisions.