Bullish sentiment begins to fade after Ethereum hits all-time high of $4,200

Ethereum (ETH) has been phenomenal over the past few weeks as ETH surged more than 80% to hit an all-time high of $4,200. Even after a 7% correction, the cumulative gain in 2021 is more than 300%, and ETH's current market capitalization exceeds $450 billion.

In the face of such an astonishing performance, neither the futures contract premium nor the options fear and greed indicator signaled extreme optimism in the market. This data is likely to cause some analysts to question whether traders have lost faith in ETH’s future price outlook.

The cooperation proposal between Aave and Starkware was voted through, and users will be able to deposit and withdraw directly on the Ethereum mainnet through Starknet: On February 13th, according to Snapshot data, the first phase cooperation proposal between Aave and Starkware received 100% support today The majority of votes passed, Starkware will provide Aave facilities to enhance Starknet's user base, the two parties will jointly invest about 385,000 US dollars, and the development will be completed within 2-3 months.

According to reports, in the first phase of the cooperation, the two parties plan to create some kind of pool model that will allow people to deposit and withdraw from the Aave Ethereum mainnet without exposure to Ethereum and its high gas costs Deposits can be made on the Aave Ethereum mainnet by purchasing aToken equivalents. [2022/2/13 9:48:46]

ETH price on Coinbase. Source: TradingView

Advtech IT Solutions launched an NFT magazine called The NFT Magazine on Ethereum: On October 24th, Advtech IT Solutions collaborated with Zilliqa, Algorand and Bitcoin Cash community members, as well as Art Rights, Artuu, The Cryptonomist and Poseidon Group, to launch the NFT magazine called The NFT Magazine. The NFT magazine journal of The NFT Magazine, which contains articles and illustrations in NFT form. The project will be minted on the Ethereum blockchain and will issue 500 shares. The cover image for the NFT Magazine won’t be made public until November 2. On the day of release on November 2, it will be listed on the NFT market Opensea at the same time. Owners of the NFT Magazine will be part of an exclusive "Readers Club". The Readers Club will eventually become a Decentralized Autonomous Organization (DAO). (Bitcoin News) [2021/10/24 6:10:06]

Citing the current bullish case would yield a long list, including CME futures launch, EIB "digital bond" sale, Berlin upgrade, and EIP-1559 days, plus expectations for the upcoming fee burn bullish.

94% of the top 100 tokens by market value are deployed on Ethereum: according to ConsenSys statistics, 94% of the top 100 tokens by market value are deployed on Ethereum; 87% of the top 800 tokens by market value are deployed on Ethereum on ethereum. The Ethereum developer community is estimated to be the largest in the world at 250,000 people. [2018/6/4]

The net worth locked in decentralized applications hit $90 billion, while ETH balances on cryptocurrency exchanges fell to all-time lows, adding additional demand for ETH and supporting the current bullish narrative.

Professional traders also expressed interest, as the open interest in ETH futures topped $10 billion. Meanwhile, VanEck filed an application with the SEC for an ETH exchange-traded fund (ETF), further evidence that the bullish outlook for ETH remains strong.

To confirm whether investor confidence is declining as ETH hits all-time highs, one should look at the monthly contract premium, or kicha. Unlike perpetual contracts, these fixed-maturity futures do not have funding rates. Therefore, their prices will be very different from normal spot transactions.

By measuring the spread between the futures market and the regular cash market, traders can gauge how bullish the market is. Whenever bulls are overly optimistic, quarterly futures contracts trade at annualized premiums (basis) of 20% or more.

OKEx ETH Quarterly Futures Basis Source: Skew

As the chart above shows, the current annualized premium of 23% is below average and well below its April 13 peak of 47%. At that time, ETH had gained 52% in three weeks to nearly $2,400.

A basis level of 23% is close to extreme optimism, but one would expect it to be much higher given the recent rally. Therefore, one should also evaluate how options traders are pricing downside risk.

To assess the level of optimism among traders after ETH refreshed its all-time high of $4,200, one should look at the 25% delta skew. This indicator provides a solid "fear and greed" analysis by comparing similar call (buy) and put (sell) options side by side.

This indicator turns positive when neutral to bearish put options are at a higher premium than similar risky call options. This condition is often considered a "fear" situation. On the other hand, a negative value implies a higher cost of upside protection and is bullish.

25% delta skew for 30-day ETH options Source: laevitas.ch

The chart above shows this indicator at -10, which is considered a neutral to bullish zone. When it tends to -20, it is often considered a "greedy" momentum, which happened on May 9 when ETH hit a new all-time high.

Both derivatives indicators are on the edge of neutral to bullish territory, which is unusual after a steady and positive performance. Therefore, one can conclude that professional traders are not "overexcited".

However, the same data could also be interpreted as a lack of confidence among professional traders, fueling bears’ hopes of an eventual correction in ETH’s price. Unfortunately, it’s too early to tell because it’s unclear when Ethereum’s fee issues will be resolved.

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